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Keeping net adjusted income below £100K
Comments
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I think there’s some confusion. I wasn’t for once suggesting I remove my companies pension contribution or remove my contributions twice!
My salary pre paying pension or shares is say 95. I pay 5K into a pension via salary sacrifice and I do 1K by exactly the same mechanism to a shares scheme.My taxable pay is therefore 89K.
Assuming no dividends or savings my net adjusted income is 89K.
I do actually have say 300 quid of interest payments and 600 quid of dividend payments.
that therefore would take adjusted net income to 89,900.
pretty sure this is correct now. My terminology maybe hasn’t been right but my I’m 100 percent certain I remove my pension in the calculation from my gross salary to give my taxable pay. I don’t then obviously remove it again. Only once!
My main concern was breaching the 60K pension limit and paying tax on my pension and that pushing my net adjusted income back over 100K but Jeremy has made it clear that the two don’t impact each other and I should be absolutely fine.
thank you0 -
Are you buying partnership shares under a SIP (share incentive plan)? If so, my understanding is that these are treated for tax purposes as reducing pre-tax salary (equivalent to salary sacrifice), so are not included in adjusted net income.1
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Jeremy535897 said:Are you buying partnership shares under a SIP (share incentive plan)? If so, my understanding is that these are treated for tax purposes as reducing pre-tax salary (equivalent to salary sacrifice), so are not included in adjusted net income.
I think i am clear now and the thing i wanted to be sure of is i can keep net adjusted income below £100K to get benefits whilst breaching the pension annual limit and paying tax just on the pension amount about the 60K. And i think you've made that clear.
Therefore I will now make the election to salary sacrifice my bonus to my pension so i don't have to count it in my net adjusted income calculation.
Thank you!0 -
Don't forget the £60,000 limit is next tax year, not the current one.0
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Jeremy535897 said:Don't forget the £60,000 limit is next tax year, not the current one.
Still going back and forth with financial advisor and he just doesn't get it. To confirm:
* I can keep my net adjusted income below 100K to allow me to access child care benefits by contributing bonus/more salary to my pension
* In doing so I may breach the annual pension allowance but that is fine as i just pay tax on the amount i breach separately and it doesn't impact net adjusted income and access to childcare.
:-)0 -
That is certainly my interpretation of the legislation. The pension contribution reduces adjusted net income, either because your salary is smaller in the first place (salary sacrifice) or because you personally make contributions to your pension scheme. The government could have chosen to take away this reduction, but instead they chose to collect, by means of a specific annual allowance charge, an amount of tax equal to the benefit they perceived the taxpayer received from making the extra contributions.0
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mortgageadviceda said:Jeremy535897 said:Don't forget the £60,000 limit is next tax year, not the current one.
Still going back and forth with financial advisor and he just doesn't get it. To confirm:
* I can keep my net adjusted income below 100K to allow me to access child care benefits by contributing bonus/more salary to my pension
* In doing so I may breach the annual pension allowance but that is fine as i just pay tax on the amount i breach separately and it doesn't impact net adjusted income and access to childcare.
:-)0 -
Can I just ask, have you calculated the ‘value’ you are getting from the childcare benefits - TFC is worth up to £2k a year, value of 30h over 15h is harder to quantify but if I look at the prices for our nursery that is worth just over 3k per annum. Unless you have a large number of children in childcare, it just strikes that making such large pension contributions - even in excess of the annual allowance and getting charged for that - just to retain those benefits seems a bit overkill?Unless your lifestyle won’t be significantly impacted by such large salary sacrifice - and of course it is all going into the pension though you won’t see that for a long time. But I must admit it all seems a bit excessive to me!0
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Jeremy535897 said:That is certainly my interpretation of the legislation. The pension contribution reduces adjusted net income, either because your salary is smaller in the first place (salary sacrifice) or because you personally make contributions to your pension scheme. The government could have chosen to take away this reduction, but instead they chose to collect, by means of a specific annual allowance charge, an amount of tax equal to the benefit they perceived the taxpayer received from making the extra contributions.0
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[Deleted User] said:mortgageadviceda said:Jeremy535897 said:Don't forget the £60,000 limit is next tax year, not the current one.
Still going back and forth with financial advisor and he just doesn't get it. To confirm:
* I can keep my net adjusted income below 100K to allow me to access child care benefits by contributing bonus/more salary to my pension
* In doing so I may breach the annual pension allowance but that is fine as i just pay tax on the amount i breach separately and it doesn't impact net adjusted income and access to childcare.
:-)0
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