Low wage cutting tax

tackem

My wage hovers around 12K.
I get the odd bit of overtime which means I go above the tax limits and pay tax occasionally. When my wage drops back below the limit I get my tax refunded.
As the tax thresholds have not been raised any wage rise I receive will lift me into the tax band on a permament basis and I will take home less money; In effect a pay cut.
I was thinking of using a 'salary sacrifice' to drop my pay below the tax limits, however I do not have enough time to grow a pension pot, I don't need a car or a bike and I don't need a gym memebership. (ie All the usual schemes of salary sacrifice)
Can anyone suggest an alternative way to sacrifice salary? 

Dazed_and_C0nfused

I don't understand why pension contributions wouldn't be a sensible option if your aim is to save tax?

You would have to be careful with the figures and cannot reduce pay to less than NMW but it is "tax efficient" as you would also avoid paying NI on the amount sacrificed.

Potentially you could sacrifice £100 of salary which would have only been £68 take home pay and have a pension fund of £100.  Some enlightened employers also chip in extra from their own NI saving.

p00hsticks

tackem said:

As the tax thresholds have not been raised any wage rise I receive will lift me into the tax band on a permament basis and I will take home less money; In effect a pay cut.

No it isn't. If a pay rise takes your annual salary over your personal allowance, then yes, a proportion of that pay rise will be taken in tax, but you will still take home more money that you did before the rise.

Jeremy535897

p00hsticks said:

tackem said:

As the tax thresholds have not been raised any wage rise I receive will lift me into the tax band on a permament basis and I will take home less money; In effect a pay cut.

No it isn't. If a pay rise takes your annual salary over your personal allowance, then yes, a proportion of that pay rise will be taken in tax, but you will still take home more money that you did before the rise.

If inflation is 8% and you get an 8% pay rise, and pay tax on it, you are effectively taking a pay cut.

RobM99

Do you want 80% of something or 100% of nothing?

frugalmacdugal

Hi,

try this wee GADGET using different salary figures and pension contributions for a comparison.

r6mile

Clearly there is a misunderstanding here about how income tax works. It’s a marginal rate - only your income above the personal allowance (£12,570) will be taxed at 20% - not all of it.

If you earn 1k above the threshold - £13,570 - your net will be £13,250. You will pay c£200 in income tax and £120 in national insurance. So you keep £68 for every £100 you earn. It may of course still be worthwhile to salary sacrifice into a pension - if that’s an option - but you will not be worse off from earning more money!

PS: There are some weird cliff edges in the tax system - ie marriage allowance. But this isn’t it!

p00hsticks

Jeremy535897 said:

p00hsticks said:

tackem said:

As the tax thresholds have not been raised any wage rise I receive will lift me into the tax band on a permament basis and I will take home less money; In effect a pay cut.

No it isn't. If a pay rise takes your annual salary over your personal allowance, then yes, a proportion of that pay rise will be taken in tax, but you will still take home more money that you did before the rise.

If inflation is 8% and you get an 8% pay rise, and pay tax on it, you are effectively taking a pay cut.

But not as big a pay cut as if you don't take the pay rise at all.....

penners324

You won't get a pay cut. You're misunderstanding the tax system