Downsides to entering 40% Income tax bracket

loofer

I've been on the cusp of the 20% income tax bracket for a year and after getting my bonus this month, I know I will have have entered the 40% tax bracket over the course of 2016/17, but not my much over the threshold.

Apart from the obvious of paying a higher rate of tax above the threshold (which won't be much for me), what are the other drawbacks or pros (if there are any)?

• I don't have a company car
• I do contribute to a company pension scheme
• I do contribute to a dental health scheme through Salary Sacrifice. It saves NI but the BIK, I believe, will be added to my P11D. (first year I'm taking this benefit)
• I currently get 10% Marriage allowance transferred from my Mrs. I assume I will no longer be eligible for this? - should I inform the tax office now.
• Will I still be eligible for Child Benefit or will this be stopped/reduced?
• Will I need to fill in an SA et end of tax year, perhaps to claim the Gift Aid difference on my charity donations? What other use will there be for the SA
• Any other pros/cons I've missed please

CLAPTON

loofer wrote: »

I've been on the cusp of the 20% income tax bracket for a year and after getting my bonus this month, I know I will have have entered the 40% tax bracket over the course of 2016/17, but not my much over the threshold.

Apart from the obvious of paying a higher rate of tax above the threshold (which won't be much for me), what are the other drawbacks or pros (if there are any)?

• I don't have a company car
• I do contribute to a company pension scheme
• I do contribute to a dental health scheme through Salary Sacrifice. It saves NI but the BIK, I believe, will be added to my P11D. (first year I'm taking this benefit)
• I currently get 10% Marriage allowance transferred from my Mrs. I assume I will no longer be eligible for this? - should I inform the tax office now.
• Will I still be eligible for Child Benefit or will this be stopped/reduced?
• Will I need to fill in an SA et end of tax year, perhaps to claim the Gift Aid difference on my charity donations?
• Any other pros/cons I've missed please

firstly are you sure your total earnings, net of gross pension contributions but including BIK will exceed 43,000?

you will have the zero rate saving band reduced from 1000 to 500

loofer

CLAPTON wrote: »

firstly are you sure your total earnings, net of gross pension contributions but including BIK will exceed 43,000?

you will have the zero rate saving band reduced from 1000 to 500

Yes, my basic income alone will be £43,800 and the bonus will put me about 10% ahead of that. Pension contribution is 6%

Re zero savings rate...I believe banks pay gross rate on savings. How do I inform HMRC if my savings income was above 500? will it be at end of tax year via SA?

CLAPTON

loofer wrote: »

Yes, my basic income alone will be £43,800 and the bonus will put me about 10% ahead of that. Pension contribution is 6%

Re zero savings rate...I believe banks pay gross rate on savings. How do I inform HMRC if my savings income was above 500? will it be at end of tax year via SA?

you won't know the figure until year end so wait until then

loofer

CLAPTON wrote: »

you won't know the figure until year end so wait until then

surely if basic income alone takes me over the threshold then it's a given isn't it that I will be in higher bracket?
Or have I missed something?

agrinnall

Yes, it's the interest earned figure and the amount of tax that you'll have to pay on it that you won't know until the end of the year.

xylophone

Could you not pay enough into your pension to obviate the problem?

https://www.theguardian.com/money/2013/sep/28/child-benefit-pension-contributions-higher-earners

That way you would not need to worry about reduced child benefit/ reduced personal savings allowance/inability to take advantage of marriage allowance.....

Darksparkle

Child Benefit is affected if your adjusted net income is over £50,000.

https://www.gov.uk/child-benefit-tax-charge/overview

kidmugsy

xylophone wrote: »

Could you not pay enough into your pension to obviate the problem? ...That way you would not need to worry about reduced child benefit/ reduced personal savings allowance/inability to take advantage of marriage allowance.....

Exactly. Simplify life and save for retirement: it's a double whammy!

[Deleted User]

loofer wrote: »

Yes, my basic income alone will be £43,800 and the bonus will put me about 10% ahead of that. Pension contribution is 6%

Re zero savings rate...I believe banks pay gross rate on savings. How do I inform HMRC if my savings income was above 500? will it be at end of tax year via SA?

If your pension contribution is 6% this reduces your taxable basic income before bonus to £41172.

CLAPTON

[Deleted User] wrote:

If your pension contribution is 6% this reduces your taxable income to £41172.

plus the 10% bonus