might enter higher tax bracket

1jim

Hi all, I am in the fortunate position that I may enter the higher tax bracket next year

I think my salary will be £51668 next financial year
I am employed in the NHS and pay into NHS Pension at a rate of 12.5%

I am right in thinking that this will reduce my "income" to below the higher tax bracket?

And on a slightly different but related note- if the income is below £50k due to pension contributions- is the £50k child benefit rules based on income after pension contributions or will it be based on the £51668 amount?

thanks

Dazed_and_confused

Where are you resident for tax purposes?

Scotland, Wales or England/N.Ireland?

1jim

Dazed_and_confused wrote: »

Where are you resident for tax purposes?

Scotland, Wales or England/N.Ireland?

sorry, yes that would be helpful
England

Dazed_and_confused

As you have realised salary is often irrelevant for tax purposes.

If the NHS operate a "net pay" pension scheme then your taxable pay, the amount which goes on your P60 would be £45,210 well under the current higher rate threshold.

The High Income Child Benefit Charge isn't based on taxable income. It is your "adjusted net income" that determines this.

You can't deduct the NHS pension contributions as they have already been deducted when working out your P60 pay figure.

Don't forget that savings interest is included when calculating your adjusted net income however until the next Budget takes place it's impossible to know how close to the threshold you'll be. But at the moment you appear to have some headroom.

Dazed_and_confused

You can check a recent payslip to see if it's net pay, you will have say salary £4000 and a taxable pay/salary figure which is net of your pension contributions, £3,500 using your 12.5% figure.

1jim

Dazed_and_confused wrote: »

As you have realised salary is often irrelevant for tax purposes.

If the NHS operate a "net pay" pension scheme then your taxable pay, the amount which goes on your P60 would be £45,210 well under the current higher rate threshold.

The High Income Child Benefit Charge isn't based on taxable income. It is your "adjusted net income" that determines this.

You can't deduct the NHS pension contributions as they have already been deducted when working out your P60 pay figure.

Don't forget that savings interest is included when calculating your adjusted net income however until the next Budget takes place it's impossible to know how close to the threshold you'll be. But at the moment you appear to have some headroom.

Thanks, makes perfect sense re higher rate tax :-)

re High Income child benefit charge- am i right in thinking that this would then be based on the £51,668 salary plus any other income which in my case would just be savings--presumably savings in an isa would be exempt and what little is outside of an isa could be in my wifes name?

I think I would only need to pay £200-£300 back which is only a bit of what we receive as we have 2 children... I guess I could reduce this by Salary Sacrifice but guess I would need to find something valued at £1,669 a year?

1jim

Dazed_and_confused wrote: »

You can check a recent payslip to see if it's net pay, you will have say salary £4000 and a taxable pay/salary figure which is net of your pension contributions, £3,500 using your 12.5% figure.

I think it is net pay
pensionable pay is listed as £4027
currently taxable pay is listed as £3523,

Dazed_and_confused

re High Income child benefit charge- am i right in thinking that this would then be based on the £51,668 salary plus any other income which in my case would just be savings--presumably savings in an isa would be exempt and what little is outside of an isa could be in my wifes name?

No, your starring point would be the £45,210 (which would be the taxable pay on your P60).

I suppose you could start with £51,668 and deduct net pay pension contributions but personally I think once you start introducing non taxable income things get more complicated than they need to be.

You can ignore ISA interest and anything in your wife's sole name.

1jim

Dazed_and_confused wrote: »

No, your starring point would be the £45,210 (which would be the taxable pay on your P60).

I suppose you could start with £51,668 and deduct net pay pension contributions but personally I think once you start introducing non taxable income things get more complicated than they need to be.

You can ignore ISA interest and anything in your wife's sole name.

ah, sorry, totally misunderstood.
So its likely then that I can avoid the higher rate tax without having to do anything due to pension contributions

and that I can then avoid the higher rate child benefit charge without having to alter anything


have been a Nurse for just over 20years and worked hard to get to this position in a job I love and all of this seemed a touch complicated and was initially worried I would be worse off than before

thanks for your help, really appreciate it

Dazed_and_confused

Your existing pension contributions are sufficient to keep you out of both the 40% tax bracket and mean you won't have a High Income Child Benefit Charge to pay.

It's quite possible that from April the basic rate level, which usually increases each year, will be over £50k so the High Income Child Benefit Charge, the threshold of which has never changed since it was introduced 6-7 years ago will be being paid by some basic rate taxpayers

unholyangel

Dazed_and_confused wrote: »

Don't forget that savings interest is included when calculating your adjusted net income however until the next Budget takes place it's impossible to know how close to the threshold you'll be. But at the moment you appear to have some headroom.

Obviously a bit of uncertainty given current affairs but the tories policy was to keep the personal allowance & rate bands the same next year and then after that, have them increase with the CPI.

Although one of the things they were changing for the better was corporation tax - to lower it to 17% from 19%.

And of course, the price of everything excise (beer, wine, spirits, cigs, petrol) is set to increase.


None of that will be good for the average taxpayer but I'm pretty sure there's an elephant in the room (wearing an EU flag) that will determine more votes than taxation policy.