the £100k tax trap

mat5664 · 18 July 2017 at 1:50PM

I currently sacrifice my salary and pay additional pension contributions to avoid the 60% tax trap that you fall into if you earn over £100k due to the tapering of the personal allowance.

So I've just found out that Im going to get a bonus of £9k later this year. The obvious thing is to pay it into my pension- however for this year I'd like to take the money.

Question I have is that if I take the money, what will I owe in tax when I do my self assessment. (In additional to the tax taken by PAYE).

Would it just be 20% of £9000 so £1800?

[Deleted User] · 18 July 2017 at 4:19PM

How much is in your code for pension contributions and how much will you actually pay?

mat5664 · 18 July 2017 at 8:46PM

my pension contributions are on salary sacrifice, so there's nothing in my code at all. My tax code is the full allowance less a small amount for private health benefit.

Dazed_and_confused · 18 July 2017 at 9:13PM

Tax wise wouldn't it be a minimum 40% of £9,000 plus an extra 20% if this particular £9,000 meant you were started losing your personal allowance?

Dazed_and_confused · 18 July 2017 at 9:19PM

Some of this should be taken automatically via PAYE but unless you tell HMRC you expect your income to go over the £100k limit you will be getting the benefit of your personal allowance when it won't ultimately be due.