Advice re ducking under the higher rate threshold please

Spidernick · 16 November 2014 at 4:06PM

SJD48 wrote: »

Higher risk but you can incest in a VCT and get 30% tax relief if you hold for 5 years.

Do you have to keep it in the family then?

Personally I wouldn't recommend VCTs to someone on this level of income. If they were a 45% taxpayer then possibly, but as you point out, these have a higher level of risk. This also wouldn't avoid 40% tax - it would just refund some of it back. Aren't there minimum amounts that most schemes require to be invested and which take these out of reach of most people? (I might be wrong in that.)

Personally I think the OP is very lucky to get overtime on that level of salary. In my job a new graduate on about half that salary won't get overtime.

Paying higher-rate tax isn't then end of the world and is, in some respects, an achievement, albeit less of one than it used to be, as more and more people are drawn into it. The most efficient way to avoid 40% tax is the company pension route, especially as there will be an additional 2% NI saving on a SMART pension (and the employer may even share their 13.8% employers' NI saving with the employee). With my employer we have to choose our flexible benefits for calendar year 2015 this month, so there is an element of estimating that needs to be done, especially as the tax year in the UK is not a calendar year.

Also people should make sure they have enough money to live on. There's no point sacrificing so much of your salary just to avoid 40% tax if you then can't meet your bills and day-to-day living expenses!