Quick question

Malthusian

FatherAbraham wrote: »

Your assertion about National Insurance is not really true. It remains in principle a contribution-based compulsory insurance scheme for workers.

In principle income tax is a temporary measure to pay for the Napoleonic Wars.

His assertion about National Insurance is absolutely true. This is one of those cases where "in principle" or "in theory" means the opposite of "in reality".

steampowered

typeractive wrote: »

Some salaries literally end up with you paying out a lot more in tax and NI, but very little benefit to yourself

If you are worried about paying too much tax, an excellent way around this would be to contribute into a private pension.

That will get you more in retirement and will get you tax relief.

typeractive

steampowered wrote: »

If you are worried about paying too much tax, an excellent way around this would be to contribute into a private pension.

That will get you more in retirement and will get you tax relief.

Thanks steampowered - how does that work? Does the money come out of wages prior to Net pay? Which in turn will make the net pay less anyway.

Dazed_and_confused

Personal pension or SIPP contributions are often paid out of take home pay and for most people they do not have any affect on the amount of tax you actually pay.

Basic rate payer who pays £2000/year in tax will still pay £2000/year BUT they will get basic rate tax relief added to the pension so if you paid, say, £4000 into a SIPP then the pension company would add £1000 so your pension fund has £5000 in but it only cost you £4000.

If you pay sufficient higher rate tax then the same £5000 in your fund could cost you just £3000. The original £4000 paid to the SIPP company and £1000 higher rate tax relief you can claim from HMRC.
Note: You don't actually get a fixed £1000 from HMRC but the gross contribution of £5000 increases the amount of basic rate tax you can pay thus reducing the amount of higher rate tax you pay so often this is worth £5000 x 20% = £1000 (plus or minus any other tax owed/due back to you for any other reasons)