High Earner - Cutting Tax

Cameron1590_2

Hello,

I am a contractor inside IR35. My assignment income before any tax is estimated to be £147k this year. 

Once I have paid employer tax/NI/Apprenticeship Levy, I will have an income of £127k which will then be subject to PAYE Tax and NI.

My umbrella company has said they can set up a workplace pension for me that will allow contributions to be made on my assignment income (so pre employer taxes and then PAYE income tax etc).

Would I be financially better off paying a chunk of my assignment income into a pension so I am left with a PAYE income of just under £100k?

If so, what would this look like in terms of numbers? I have tried to work it out and well I've made a mess of it and end up confusing myself! 

Thanks,

Cam

K_S

@Cameron1590_2 I do get the odd umbrella contractor client that salary sacrifices everything above min-wage (that's as low as the umbrella company will allow you to go). So someone on a 700 day rate has a payslip with a gross weekly pay of £500 or so with the rest getting funnelled into their SIPP (subject to annual allowance, any carry over from prior years, etc.)

Probably makes a massive saving to their tax and NI (both employers and employee as their day rate has to cover everything) so I think you will be financially better off overall though of course most of the savings will go into your pension so you can't access it until later.

Absolute nightmare when it comes to a mortgage though when you whittle it all the way down like that!

Cameron1590_2 said:

Hello,

I am a contractor inside IR35. My assignment income before any tax is estimated to be £147k this year. 

Once I have paid employer tax/NI/Apprenticeship Levy, I will have an income of £127k which will then be subject to PAYE Tax and NI.

My umbrella company has said they can set up a workplace pension for me that will allow contributions to be made on my assignment income (so pre employer taxes and then PAYE income tax etc).

Would I be financially better off paying a chunk of my assignment income into a pension so I am left with a PAYE income of just under £100k?

If so, what would this look like in terms of numbers? I have tried to work it out and well I've made a mess of it and end up confusing myself! 

Thanks,

Cam