Tax implications of earning slightly over £100k

JacJac1

Albermarle said:

JacJac1 said:

Understood, and thank you once again. Bonuses are paid in March-ish each year (definitely before April), and we have the option to salary sacrifice a portion towards our pension. At that point I'll know roughly what my total taxable income is likely to be so can make the calculation of what I should add to my pension, as an 'employer' contribution. I'll include some leeway and be sure to count savings interest, health insurance paid by my employer, and a small amount of share dividends.

Plus your future self will be happy that  a more realistic % is going into your pension, and that £5K extra going in has effectively only cost you £2,900. ( not including any benefit for getting under £100K)

Current self wants to buy a house and stop renting!    Usually my bonus gives my deposit fund a boost but will have to look at things differently next year. 

Grumpy_chap

JacJac1 said:

Current self wants to buy a house and stop renting!    

With the income level you mention, there may be other areas of lifestyle that can be adjusted in the short-term to allow you to get from the rental to own house.  The vast majority of house buyers do so with far lower incomes.

It really is worth diverting that £5k into pension.  If you do nothing, the marginal rate of tax on the £5k will be 62% (higher rate IT plus withdrawal of personal allowance plus NI) so you only receive £1.9k.  Will that really make a meaningful difference to things given the overall income level?

If you have children, getting below the £100k also means you retain access to tax-free childcare.