Salary Sacrifice Calculation - Help Please

MrsWenger

Hi, I have an existing thread on the ISA Saving and Investments thread as I originally had questions about about a Vanguard LifeStrategy S&S ISA.

Several replies there suggest I should consider making extra contributions to my company pension instead so I am looking into that and I thought this would be the best board to ask for guidance.

I have established that I am able to make contributions via Salary Sacrifice but I don’t know how to calculate this to work out how much I would need to contribute to move me out of the 40% tax band.

Can anyone offer any information to assist me please? I am not sure if there is an online calculator available or if I can work it out manually.

Dazed_and_confused

You can almost certainly work it out manually.

But you will need to estimate your taxable income from all sources to start with.

And know which country you are likely to be resident in for tax purposes for 2019:20 (assuming you mean to do this from the start of the new tax year).

That should mean you can work out how much of your total taxable income will be liable to higher rate tax.

MEM62

For the ensuing year you will need to keep your taxable income below £37,500.

Paul_Herring

MEM62 wrote: »

For the ensuing year you will need to keep your taxable income below £37,500.

You appear to have forgotten to include the personal allowance there.

westv

Paul_Herring wrote: »

You appear to have forgotten to include the personal allowance there.

They did say taxable income.

Paul_Herring

westv wrote: »

They did say taxable income.

A distinction, given the context, that does more to confuse than enlighten.

Dazed_and_confused

I agree £37,500 is very misleading.

Most would say £50,000.

But if the op has the right mix of income and residency position for 2019:20 then it could easily be £52,500 before any higher rate tax was actually payable (although that is a slightly different situation to the op's very specific question about moving out of the 40% band given you can be in the 40% band without having to pay any 40% tax).

AlanP_2

Paul_Herring wrote: »

A distinction, given the context, that does more to confuse than enlighten.

It's a figure that makes more sense to me than the £50k including tax allowance as that can and does vary between people and across tax years as adjustments are made.

The best description is £37.5k plus Tax Allowance.

MEM62

Dazed_and_confused wrote: »

I agree £37,500 is very misleading.

Most would say £50,000.

I didn't realise I needed to be that specific. The term 'taxable income' to me means taxable income, plus the value of any taxable benefits less your personal allowance. Is there any other definition?

Paul_Herring

The point is, the OP wants to know at what income they start getting taxed at 40%.

£37,500 is not the answer to that question.

Dazed_and_confused

I didn't realise I needed to be that specific. The term 'taxable income' to me means taxable income, plus the value of any taxable benefits less your personal allowance. Is there any other definition?

To me, and others who have commented, taxable income is the income on which your tax position is established.

ISA's are not taxable income.

Premium Bonds wins are not taxable income.

Dividends are taxable income.

The salary recorded on a P60 is taxable income.