Optimising Tax - Calculators/Spreadsheets?

Aminatidi

I have a little bit of a first world problem that due to a promotion/role change I've strayed into the higher rate tax band once tax on salary and a small amount of savings interest and dividends on unwrapped investments are taken into account.

Does anyone know of any decent calculators/spreadsheet templates online that can be used to have a bit of a play with things like additional salary sacrifice contributions please?

The numbers are pretty simple this stuff just isn't my strongpoint.

• £60K PAYE salary
• Currently paying 9% into workplace pension via salary sacrifice
• £250 (ish) interest/year on bank cash
• Whatever yield HSBC Global Strategy Balanced INC is paying which is likely to be approx £3K/year on £150K in a GIA.

Everything else is ISA or pension and I'm maxing out the ISA each year hence the GIA.

Thanks 👍🏻

cloud_dog

Is it 9% on your salary or 9% on qualifying earnings?  (I know this isn't the specific question you asked).

Aminatidi

I'm not sure what "qualifying earnings" means if I'm honest.

I have a single employer I'm PAYE my gross salary is X and I contribute 9% to the workplace scheme via Salary Sacrifice to get a 9% match which is the maximum my employer will match.

Dazed_and_C0nfused

Aminatidi said:

I'm not sure what "qualifying earnings" means if I'm honest.

I have a single employer I'm PAYE my gross salary is X and I contribute 9% to the workplace scheme via Salary Sacrifice to get a 9% match which is the maximum my employer will match.

Two things, you aren't contributing anything to the pension, you are agreeing to a reduced salary in return for additional employer contributions.  Which is why no tax relief is added to your pension.

Qualifying earnings relate to the amount that has to be taken into account for pension contributions.  This can make a significant different to the amount ending up in your pension.

18% of £60k is much more than 18% of £53,760.

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-/earnings-thresholds

Aminatidi

Still not sure I fully understand the difference but if I go here https://www.uktaxcalculators.co.uk/ and put in my current gross salary (bang on £55K) and set the pension type under "more options" to Salary Sacrifice and set the pension contributions to 9% it spits out £412.50 monthly pension contribution.

If I look in the Aviva portal the monthly payment into my pension is exactly £825.

Dazed_and_C0nfused

Aminatidi said:

Still not sure I fully understand the difference but if I go here https://www.uktaxcalculators.co.uk/ and put in my current gross salary (bang on £55K) and set the pension type under "more options" to Salary Sacrifice and set the pension contributions to 9% it spits out £412.50 monthly pension contribution.

If I look in the Aviva portal the monthly payment into my pension is exactly £825.

Then it seems you have an enlightened employer who is not using the rules to minimise the amount they add.

That £825 doesn't attract any pension tax relief (as they are all employer contributions) but your taxable (and NIC'able) income is only £50,050, not £55,000.

Aminatidi

Thanks that's good to know 👍🏻

Right now by my maths I think the amount I need to Salary Sacrifice in total is approx £12500/year.

So if I'm making 9% contributions to get the 9% match I need to add approx. £600/month additional contributions.

Does that sound about right?

I'm not tied to that £600 payroll have said it can be changed month to month so long as they have enough notice.

Dazed_and_C0nfused

It's tricky to say anything more really as your first post quoted a salary of £60k but this has now become £55k.

And where there is a change part way through a tax year the reality (of your actual salary) is likely to be somewhere in between.

Aminatidi

£55K is current £60K is after promotion/role change - apologies if this wasn't clear 👍🏻

Sounds like the basic facts don't change i.e. shovelling money into the pension via salary sacrifice is the simplest/easiest way to bring down the overall tax I pay.

Not expecting anyone to be able to run the exact numbers more a sanity check that my logic/understanding is sound.

Dazed_and_C0nfused

Aminatidi said:

£55K is current £60K is after promotion/role change - apologies if this wasn't clear 👍🏻

Sounds like the basic facts don't change i.e. shovelling money into the pension via salary sacrifice is the simplest/easiest way to bring down the overall tax I pay.

Not expecting anyone to be able to run the exact numbers more a sanity check that my logic/understanding is sound.

Until you get to the point of sacrificing income to less than the Personal Allowance threshold (usually not possible for most people due to NMW rules) salary sacrifice is the simplest and most financially beneficial method as not only do you avoid paying tax but you also avoid NI.

If you contributed using either the net pay or RAS methods you would avoid some tax or get basic rate pension tax relief but there would be no NI saving.

Aminatidi

Thank you.  

For now I'm adding an additional £600/month.

Will check/confirm the payslip is what my online calcs suggest it should be when it lands.