Total Income & Avoid 40% Tax

Its_all_Dinx

Hello everyone.

I searched the World Wide Web and even Google to help answer this but no one could.

My question is...  how much do I need to increase my pension on salary sacrifice to avoid paying 40% tax

Below is my income details all yearly

Salary - £55,000

Dividends - £1,400

Interest from savings(non isa) £1000

I do have plan 1 student loan and no other salary sacrifice plans in place.

I cannot remember how but I worked out I need to increase my pension to 14%.

Tax code currently is 1263l (uniform rebate)

Please try show your working out as it could others.

Dazed_and_C0nfused

Based on what you've posted 14% will be fine and gives a little bit of margin for error/changes to expected income.

Taxable income will then be
£47,300 + £1,400 + £1,000 = £49,700.

Albermarle

I searched the World Wide Web and even Google to help answer this but no one could.

Next time you will know to come here first 

Bookworm105

Its_all_Dinx said:

how much do I need to increase my pension on salary sacrifice to avoid paying 40% tax

Please try show your working out as it could others.

salary sacrifice means it never enters your gross pay so never gets treated as taxable income
therefore to remain below HR tax threshold you need to have total gross income from all sources < HR threshold £50,270 @ 24/25 tax band  (assuming you are not in Scotland!)

simple maths as shown by Dazed gets you the answer, with as he says, a margin for error (eg your use of rounded amounts)

Its_all_Dinx

Thank you both for info,   Its hard.  You get more money but to earn more   the government take more. 

I may take up cycle to work  and other benefits they have. To make the most of salary sacrifice.  Plus I get something in return.  Or have  a nice pension.   Or both

Bookworm105

Its_all_Dinx said:

Thank you both for info,   Its hard.  You get more money but to earn more   the government take more. 

I may take up cycle to work  and other benefits they have. To make the most of salary sacrifice.  Plus I get something in return.  Or have  a nice pension.   Or both

doubtless the homeless sleeping on the streets will be full of sympathy for your choice between a bike or increased pension 
tax is not 100%, even with incoming Labour govt (yet!)

flaneurs_lobster

Bookworm105 said:

Its_all_Dinx said:

Thank you both for info,   Its hard.  You get more money but to earn more   the government take more. 

I may take up cycle to work  and other benefits they have. To make the most of salary sacrifice.  Plus I get something in return.  Or have  a nice pension.   Or both

doubtless the homeless sleeping on the streets will be full of sympathy for your choice between a bike or increased pension 
tax is not 100%, even with incoming Labour govt (yet!)

If you find questions asking how to minimise tax or how to increase pensions offensive then you are definitely in the wrong place.

The snide throwaway about non-existent Labour party tax policy is also not very useful. 

Albermarle

Its_all_Dinx said:

Thank you both for info,   Its hard.  You get more money but to earn more   the government take more. 

I may take up cycle to work  and other benefits they have. To make the most of salary sacrifice.  Plus I get something in return.  Or have  a nice pension.   Or both

On the other hand the 40% tax relief that is available is pretty generous. It in fact costs the Treasury Tens of Billions of Pounds a year, so make best use of it !

MetaPhysical

I also buy extra days leave from work which also come out of gross pay and thus reduce your adjusted income.  If this can get you below the thresholds then these days are especially cost effective.  Even more so if they get you below the 100k threshold and you have childcare.

Its_all_Dinx

Hello everyone,  I am back again  with another question on this part.

I got dividend of £1068  in tax year 2023/24.

Do I take away the £1000 tax free limit first then include this in my taxable income or do I have to show Gross and if I do self assessment then take it away from there?

Or...  is the government system clever enough to work this all out for me?

Dazed_and_C0nfused

Its_all_Dinx said:

Hello everyone,  I am back again  with another question on this part.

I got dividend of £1068  in tax year 2023/24.

Do I take away the £1000 tax free limit first then include this in my taxable income or do I have to show Gross and if I do self assessment then take it away from there?

Or...  is the government system clever enough to work this all out for me?

There is no separate allowance for dividends.

You include all taxable income on your Self Assessment return and this will be taxed as necessary within your Self Assessment calculation.

For 2023-24 the first £1,000 will be taxed at 0% (the dividend nil rate).