Should I pay into a cash ISA, or carry on in S&S ISA?

Doctor_Who

dllive said:

Doctor_Who said:

dllive said:

thegentleway said:

Prioritising pension is usually the right answer at 40% tax bracket.

Yes, youre probably right. Its taken me years to come to this conclusion. Last year was the first year I made a load of contributions to my pension, effectively taking me down to almost a basic rate payer. I cant believe I spent so many years paying so much at the higher rate! 

I was a '40%' tax payer for the last ~15 years of my working career.....however, by making strategic annual contributions to my SIPP I never actually paid any 40% tax! HMRC increased the basic rate tax band by the gross SIPP contribution in my SA calculation and the revised band was always more than my taxable income.

So how much would I need to pay into my pension each year so I dont pay any higher rate? If my salary was £100k (to make it simple), how much would I need to contribute so I didnt pay any 40% tax?

Calculate the amount of income that is liable to 40% tax (assuming English tax payer) and make a gross pension contribution of this amount to your SIPP. HMRC will increase the basic rate tax band by the gross amount of the pension contribution meaning you pay basic rate tax on all of the income above the personal allowance. Obviously the annual allowance of £60K has to be considered across all pension contributions. 

There is an example here:

https://www.theprivateoffice.com/pensions/how-be-tax-efficient-your-pension-contributions#:~:text=By making a gross pension,extended basic rate tax band.

dllive

Great - thanks @Doctor_Who !

lithosyork

pay 49750 into pension (in total) and keep out of higher tax bracket to get better PSA

Albermarle

johnop said:

I'm not regulated to give advice, but my personal view is that interest rates on cash will fall as inflation comes down, while investment returns will likely beat cash over a longer time horizon. So for me, I'd chose investing over cash deposits for longer-term holdings. Hope that helps somewhat.

Just for clarity, very few of the regular contributors to this forum are regulated to give advice, and the very few who are, are very careful only to offer general guidance/info.
So all we can offer are personal views/opinions, pointers in a certain direction, links to useful websites, correct obvious misunderstandings etc.
Although to be fair you do see that people will recommend a course of action and providers of savings, pensions and certain well known investment funds, which I suppose is a bit of a grey area.
The main pitfall to look out for is that often you only have a part picture of a persons situation, so what seems to be on the surface a perfectly reasonable recommendation may not in fact be appropriate.