£100k trap - adjusted net income specifics

biscan25

Hi,

As the tax year draws to a close, I wanted to avoid the 60% income tax trap, but have a few questions on the exact calculation on adjusted net income.

Details are as follows:
Taxable pay (including BIK) £102,075
Interest on savings £500 (so zero above allowance, Q1 : I'm not sure if i need to include all of this or just bit over £500)
No dividends outside ISA wrapper
Expenses: £715 allowable professional fees Q2 - can I subtract these?
£310 WFH allowance? Q3 - As above, can I subtract these?
Charity donations (gift aid): £1,000 ish grossed up to £1,250

I make this £102075 + 500 - 715 - 310 - 1,250 = 100,300

So do I need to make just £300 gross pension contributions into my SIPP (£180 net) before 5 April, if my assumptions above are correct?

Thanks

Grumpy_chap

We do not have the full picture, but if you are earning £100k per year and only contributing £300 to a pension, retirement will be a massive bump when it comes.

AIUI, you will need to do a SA return to claim these deductions.

It would be prudent to engage the services of an Accountant to advise you on tax efficiency in the best overall manner and ensure you don't slip up in any way.

[Deleted User]

Also - you would need to make a pension contribution of £240, not £180, to achieve a ‘gross contribution’ of £300. The additional 20% relief on this £300 (£60) will be claimed through your tax return. The effect will ultimately be that a £300 addition to your pension will cost you £180 and your adjusted net income will also reduce by £300.

biscan25

Grumpy_chap said:

We do not have the full picture, but if you are earning £100k per year and only contributing £300 to a pension, retirement will be a massive bump when it comes.

AIUI, you will need to do a SA return to claim these deductions.

It would be prudent to engage the services of an Accountant to advise you on tax efficiency in the best overall manner and ensure you don't slip up in any way.

I'm well aware of the need for pension contributions, it is my day job! Paying the rest by salary sacrifice but do have AA left because of carry over. £100k will not be a permanant salary unfortunately, lucked out this year and will have to step down at some point in the near future.
Will also be submitting a self assessment, as over £100k, but these contributions need to go in before the year end.
Sorry the £180 was a slip up. Agree its 300/1.25 = £240.
Will engage an accountant next year if I go Ltd. I'm not sure how much they can help me this year as I'm 100% PAYE.

dkwywbicgia

Try using https://listentotaxman.com/ to test some what-if scenarios.