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Earning over 100k - pension vs debt
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joe-bloggs_4
Posts: 39 Forumite
in Cutting tax
Hopefully this is the correct forum for this question.
If you earn over 100k the general consensus is pay into a pension to bring down taxable earnings to under 100k to escape the '60% tax' trap where personal allowance is eroded.
Now say if you had a car loan is it still recommended pay extra into a pension or is it worth considering overpaying the loan. If pension is more favourable is there a point (for example APR on the loan) where loan overpaying starts to make sense?
Many thanks in advance.
If you earn over 100k the general consensus is pay into a pension to bring down taxable earnings to under 100k to escape the '60% tax' trap where personal allowance is eroded.
Now say if you had a car loan is it still recommended pay extra into a pension or is it worth considering overpaying the loan. If pension is more favourable is there a point (for example APR on the loan) where loan overpaying starts to make sense?
Many thanks in advance.
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Comments
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depends on how the interest vs tax benefits on pension and growth of the pension
Depends on you"It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
G_M/ Bowlhead99 RIP0 -
And how much is the loan for and how far above £100k you are.I’m a Forum Ambassador and I support the Forum Team on Debt Free Wannabe, Old Style Money Saving and Pensions boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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⭐️🏅😇0 -
These are not direct swaps.
Say earnings are £10k into the 60% zone. You earn £10k and get nett £4k. Or put the whole £10k into pension, which then grows (or depreciates) at whatever rate.
If you want to use the same £10k earnings to pay down debt, that is only after tax, so there is only £4k available to pay down debt, but you then save the interest payable on that £4k.
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