40% tax and childcare vouchers

gavcradd

Firstly I apologise if this is the wrong place to post this but I can't see anywhere more appropriate!

I'm a secondary school teacher and my taxable pay for the year (as per my payslip, after pension, childcare vouchers, etc) is about £4,000 short of the 40% tax bracket.

However, I also work as an examiner for one of the exam boards and earn irregular amounts from them - over the summer when I'm marking GCSE papers it comes to a few thousand pounds, some months it's nothing, some months it's a few hundred pounds depending on what they ask me to do (exam admin tasks usually). I'm paid through PAYE with them and they automatically take off 20% and use a tax code of BR.

I've just sat down and worked out from my payslips that if I do no more work for the exam board this year, I'll be £200 below the 40% tax bracket by April 1st. However, they've also just asked me to do some work which will pay approx £300 - I want to do it, it will help me with my career with them to do it (or actually, hurt me if I turn it down), but it will put me over the 40% threshold.

So what I hear you say - but 40% tax payers are not allowed to claim the same amount of childcare vouchers that 20% tax payers are, and I max out my childcare vouchers at £243 a month.

My question is - what is likely to happen if I do go so slightly over the 40% threshold? Would it just be ignored, would I have to pay back childcare voucher savings from this year or would I not be able to get them for next year?

It's worth pointing out that I'm unlikely to be in this position again next year, teacher's pay is not rising fast but the 40% threshold rate is going up, plus I've done far more work for the board than usual this year.

Any advice appreciated, and apologies for the ramble!

[Deleted User]

Many forget the personal allowance when calculating whether they are higher rate or not - I shall presume you haven't. Perhaps you could make a one off payment to your pension or similarly to charity?

gavcradd

Thanks - no, not forgotten the personal allowance (it's very slightly higher than the standard one because of union fees allowed, etc).

Interesting you mention paying extra to my pension, I have the standard teachers' one but also a small stakeholders pension which I put £100 a month into, but I already get tax relief on this (I put in £100, something like £124 gets paid in). Does this affect the calculations? Would paying more in help at all as I could happily do this?

The charity issue is also relevant, would I (obviously I think) need to do this before April and keep evidence? Does giftaiding it make a difference?

[Deleted User]

So it is gross salary less teacher pension contributions less 1500 gross additional pension - if this exceeds 42385 pay 80% of the difference into your personal pension plan e.g. Income of 42825 requires an additional contribution of 400.

Gift Aud is the way to give to charity

gavcradd

Right, this is the bit I'm confused about, perhaps silly question coming up...

My teacher's pension is taken from my payslip before any tax is taken, so I know I can take this off the amount I class as my "taxable income" for the year. I don't think I can increase this payment - it's a set percentage of my wage.

However, the personal pension is just something I pay into via direct debit - I already get tax relief added on to the amount being put into the pension pot, so I assumed that I couldn't take this away from my taxable income for the year as I already get the relief. Is this not correct? If I could count the £100 a month extra contributions, I'd have no problems at all and be quite a chunk under the 40% threshold.

[Deleted User]

Then you are fine. You can take the gross contributions on your personal pension off your total income JUST to determine whether you are HR - no other reason.

Good luck

gavcradd

Amazing, thank you ever so much for the speedy responses - you've been very helpful.

CLAPTON

gavcradd wrote: »

Amazing, thank you ever so much for the speedy responses - you've been very helpful.

just so you are clear
if you pay 100 per month from net pay then that is grossed up by your pension company to 100/.8= 125 pm or 1,500 per annum gross contribution

if you are a basic rate tax payer then thats fine
however if you are a 40% tax payer then YOU need to reclaim the 'other' 20% of tax relief directly from HMRC

[Deleted User]

CLAPTON wrote: »

just so you are clear
if you pay 100 per month from net pay then that is grossed up by your pension company to 100/.8= 125 pm or 1,500 per annum gross contribution

if you are a basic rate tax payer then thats fine
however if you are a 40% tax payer then YOU need to reclaim the 'other' 20% of tax relief directly from HMRC

Yes - I did type 1350 earlier - no idea why!

dori2o

[Deleted User] wrote:

Yes - I did type 1350 earlier - no idea why!

Even if you are not a 40% taxpayer I always advise people to still show pension contributions (excluding employer schemes where the relief is given at source i.e. contribution taken before tax is deducted) and gift aid.

Personally I think it gets you into the habit of filling these sections in and therefore helps you to understand what the effect of this is once you see the calculation, and therefore in your case you would recognise the true point at which your income becomes liable for 40% tax.

Secondly if you have had extra earnings in a certain year and have not realised that it has gone over the normal 40% limit then at least you will get any relief you are due and will not then have to make amendments tothe taxreturn (within 12 months of the filing date) or claim Overpayment Relief at somepoint down the line (within 4 years from the end of the relevant tax year).