Reducing tax ?

2oxb1ulm2ke6

Hi everyone,

Myself and my partner we are both have a £85k income this year and most likely it will go up a little bit the following year.

And we're having also two kids bellow the age of 10.

We are coming from another country and we've just moved in here 5 years and some months ago.

At this stage we're thinking how we can reduce our tax or add some money before tax into something else(for example: private school ?).

Is there anything we could do about it, anyone to ask for an advise ?

We were planning to go to a financial advisor but I'm not pretty sure that will work as I've heard other stories from some of our friends and we're not feeling very confident.

Any ideas will be very appreciated.

Keep_pedalling

Putting a good chunk of your income into pensions is the most effective tax saving measure high earners can make, paying school fees is just expenditure so won’t help. 

Are you married? If not you should consider it or civil partnership if you are planning on staying here, as IHT is likely to be an issue on the first death if you have assets over £325k.

Albermarle

If you are working for  employers ( as opposed to being self employed) , then you will presumably be contributing to workplace pensions.
Can you describe what they are ? Are they Defined Benefit pensions ( common in the public sector) or Defined Contribution ( usual in the private sector). Definitions are in the link.

Pension basics | Help with pension basics | MoneyHelper

As above the usual recommendation for higher earners is to pay more into their pension, as it attracts 40% tax relief.

We were planning to go to a financial advisor but I'm not pretty sure that will work as I've heard other stories from some of our friends and we're not feeling very confident

You should avoid financial advisors/wealth managers linked to a bank or investment provider. You should try and find a small firm of  Independent Financial Advisors locally . Normally  they are happy to have a free one hour discussion, to see if it might work for both parties.

Otherwise you can DIY ( do it yourself), but you will need to spend some time learning about investing, savings, tax, pensions etc

In reality most people do not have an advisor, or understand much ( nothing in some cases) about personal finance. However that is clearly not a great position to be in, and not a way to maximise your money.

2oxb1ulm2ke6

Keep_pedalling said:

Putting a good chunk of your income into pensions is the most effective tax saving measure high earners can make, paying school fees is just expenditure so won’t help. 

Are you married? If not you should consider it or civil partnership if you are planning on staying here, as IHT is likely to be an issue on the first death if you have assets over £325k.

We are in a civil partnership. At first I've added more money into my pension from work.

But I was thinking if there's another way maybe.

Dazed_and_C0nfused

2oxb1ulm2ke6 said:

Keep_pedalling said:

Putting a good chunk of your income into pensions is the most effective tax saving measure high earners can make, paying school fees is just expenditure so won’t help. 

Are you married? If not you should consider it or civil partnership if you are planning on staying here, as IHT is likely to be an issue on the first death if you have assets over £325k.

We are in a civil partnership. At first I've added more money into my pension from work.

But I was thinking if there's another way maybe.

If you are simply referring to the income tax you and your partner will be paying them pension contributions are likely to be the simplest way of reducing your tax liability.

With two £85k+ salaries it might be a stretch to enable you to keep all of your Child Benefit but it's certainly doable and makes the tax savings even more beneficial.

2oxb1ulm2ke6

Dazed_and_C0nfused said:

2oxb1ulm2ke6 said:

Keep_pedalling said:

Putting a good chunk of your income into pensions is the most effective tax saving measure high earners can make, paying school fees is just expenditure so won’t help. 

Are you married? If not you should consider it or civil partnership if you are planning on staying here, as IHT is likely to be an issue on the first death if you have assets over £325k.

We are in a civil partnership. At first I've added more money into my pension from work.

But I was thinking if there's another way maybe.

If you are simply referring to the income tax you and your partner will be paying them pension contributions are likely to be the simplest way of reducing your tax liability.

With two £85k+ salaries it might be a stretch to enable you to keep all of your Child Benefit but it's certainly doable and makes the tax savings even more beneficial.

About private pension contribution there's a small issue here.

Myself (i'm winning more £55K this year) and my employer it's paying my pension contribution from my NET income.

My partner (winning £30k this year) and employer paying the pension contribution from GROSS income.

I would love to keep the child's benefit, but that means we need to pay something like £35k into private pension and then to have only £50k Gross income, it's that right ?

How should we do , in order to keep the child's benefit ?

2oxb1ulm2ke6

Albermarle said:

If you are working for  employers ( as opposed to being self employed) , then you will presumably be contributing to workplace pensions.
Can you describe what they are ? Are they Defined Benefit pensions ( common in the public sector) or Defined Contribution ( usual in the private sector). Definitions are in the link.


As above the usual recommendation for higher earners is to pay more into their pension, as it attracts 40% tax relief.

We were planning to go to a financial advisor but I'm not pretty sure that will work as I've heard other stories from some of our friends and we're not feeling very confident

You should avoid financial advisors/wealth managers linked to a bank or investment provider. You should try and find a small firm of  Independent Financial Advisors locally . Normally  they are happy to have a free one hour discussion, to see if it might work for both parties.

Otherwise you can DIY ( do it yourself), but you will need to spend some time learning about investing, savings, tax, pensions etc

In reality most people do not have an advisor, or understand much ( nothing in some cases) about personal finance. However that is clearly not a great position to be in, and not a way to maximise your money.

My pension it's called a workplace pension not sure what that means, but I will look and try to understand.

Last year i've managed to save an additional £3k from tax re-calculation from HRMC which I've done it by myself (even the guy from HRMC said there's really nothing more they will have to give me and I should mind my way).

At some point we started thinking to buy a house in the UK, but with the current crazy prices we started looking into buying a house in EU.

In the UK at the moment we're renting.

daveaspy

2oxb1ulm2ke6 said:

About private pension contribution there's a small issue here.

Myself (i'm winning more £55K this year) and my employer it's paying my pension contribution from my NET income.

My partner (winning £30k this year) and employer paying the pension contribution from GROSS income.

I would love to keep the child's benefit, but that means we need to pay something like £35k into private pension and then to have only £50k Gross income, it's that right ?

How should we do , in order to keep the child's benefit ?

It is the highest earner that has to repay the child benefit if they earn more than 50k - it is not based on combined income.

Your partner earns less than 50k so their pay isn't counted in this matter.

Your pay is 55k, which is over the limit so it is your responsibility and only your wage matters. You only need to contribute a small amount to a pension to get under the 50k limit.

2oxb1ulm2ke6

I was thinking at something:

because my partner it's earning £30k/per year and has the pension taken from gross income, to send into the private pension account £17,430/per year and that means it will remain to take home only £12,570 (which should be zero tax for my partner)

on my side because i'm winning £55k/per year and my pension it's being taken from NET, I might add something there, but still I'm not sure how to be able to save the child's benefit because the total gross per year will than be around £67k per year which is above the threshold for child's benefit.

2oxb1ulm2ke6

daveaspy said:

2oxb1ulm2ke6 said:

About private pension contribution there's a small issue here.

Myself (i'm winning more £55K this year) and my employer it's paying my pension contribution from my NET income.

My partner (winning £30k this year) and employer paying the pension contribution from GROSS income.

I would love to keep the child's benefit, but that means we need to pay something like £35k into private pension and then to have only £50k Gross income, it's that right ?

How should we do , in order to keep the child's benefit ?

It is the highest earner that has to repay the child benefit if they earn more than 50k - it is not based on combined income.

Your partner earns less than 50k so their pay isn't counted in this matter.

Your pay is 55k, which is over the limit so it is your responsibility and only your wage matters. You only need to contribute a small amount to a pension to get under the 50k limit.

Does it matter if I do not take the child's benefit ?

The child's benefit have been setup by my partner (the children's mother).

So i do not receive that, she's receiving the money, or it doesn't matter ?

daveaspy

2oxb1ulm2ke6 said:

daveaspy said:

2oxb1ulm2ke6 said:

About private pension contribution there's a small issue here.

Myself (i'm winning more £55K this year) and my employer it's paying my pension contribution from my NET income.

My partner (winning £30k this year) and employer paying the pension contribution from GROSS income.

I would love to keep the child's benefit, but that means we need to pay something like £35k into private pension and then to have only £50k Gross income, it's that right ?

How should we do , in order to keep the child's benefit ?

It is the highest earner that has to repay the child benefit if they earn more than 50k - it is not based on combined income.

Your partner earns less than 50k so their pay isn't counted in this matter.

Your pay is 55k, which is over the limit so it is your responsibility and only your wage matters. You only need to contribute a small amount to a pension to get under the 50k limit.

Does it matter if I do not take the child's benefit ?

The child's benefit have been setup by my partner (the children's mother).

So i do not receive that, she's receiving the money, or it doesn't matter ?

no it doesn't matter who claims the child benefit - it is a quite ridiculous rule, as you are discovering

My wife claims the benefit for our children, but I earn more so it's my responsibility to repay if I earn over 50k

People are rightly upset that this means a couple can earn 50k each (so 100k in the household) and not have to repay any child benefit, while some might have one person earning 60k and the other nothing yet they have to repay all the child benefit.