AVC's

davep12345

Hello all,

I hope somebody on here can answer my Q on AVC's
I am a 20% tax payer
I am paying into a local government (my employer) AVC scheme with prudential.

What I would like to achieve is minimise the amount of TAX I pay on a monthly basis
So if I pay for example £250 per month in Tax & I started paying £250 per month into my AVC
Would my monthly AVC contribution reduce the monthly tax contribution to zero

so in summary will AVC payments cancel out my tax payments.

If this is not possible how can I work out how much AVC payments need to be to reduce the amount of tax I pay ??

Hope that makes sense

Thanks in advance

cloud_dog

Basic rate of tax is charged at 20% over and above your personal allowance (£11850). So, to save £250 in tax you would need to sacrifice (make a payment of) £1250 in to your pension.

Once you make payments down to your personal allowance level (£11850 18/19) there is no tax to save.

Unsure if there are any lower earnings limit which may come in to this equation or not, or if they are irrelevant to additional payments.

davep12345

£1250 per month ??

Linton

If you want to save £250/month in tax you need to pay £1250/month in pension. 20% of £1250=£250.

davep12345

not the answer I wanted, but thanks all for the reply & explanation.

Any other ways I can reduce my monthly tax ??

Aiki

Another way to reduce monthly tax would be if married and your spouse's income is below the personal allowance arrange to have some of their personal allowance transfered to you.

From the HMRC website


Married allowance lets you transfer £1,190 of your Personal Allowance to your husband, wife or civil partner.This can reduce their tax by up to £238 every tax year (6 April to 5 April the next year).

cloud_dog

davep12345 wrote: »

Any other ways I can reduce my monthly tax ??

Earn less.

AlanP_2

davep12345 wrote: »

not the answer I wanted, but thanks all for the reply & explanation.

Any other ways I can reduce my monthly tax ??

Why do you want to reduce your tax, it seems to be a strange objective? Is it really what you want to achieve?

Earning less, as suggested, will achieve it but you will be worse off.

Personally I've always wanted to be a HR taxpayer as I would be earning a lot more and would have more to save, invest and spend. Tax implications would be a distant second to benefits maximisation

Durban

AlanP wrote: »

Why do you want to reduce your tax, it seems to be a strange objective? Is it really what you want to achieve?

Earning less, as suggested, will achieve it but you will be worse off.

Personally I've always wanted to be a HR taxpayer as I would be earning a lot more and would have more to save, invest and spend. Tax implications would be a distant second to benefits maximisation

I don't think that it is a strange objective to want to reduce the tax legally on your earnings.

Do you wear a uniform for work or even clothing with your company logo on it that you have to wash at home. You can receive a small tax allowance for that.

AlanP_2

Durban wrote: »

I don't think that it is a strange objective to want to reduce the tax legally on your earnings.

Do you wear a uniform for work or even clothing with your company logo on it that you have to wash at home. You can receive a small tax allowance for that.

Isn't it a bit like glass half full / half empty in reality?

Rather than minimise tax why not aim to maximise net income as the objective.

Reducing tax could contribute to that but seems to a more positive approach that doesn't limit options.