New to 40%-help!

Leeslady

Hi
I work for the NHS, and 40% tax hasn't been on my radar, until suddenly it is. I'm on a few quid over 50 grand, so hovering just under the threshold. 
Our pay award this year, and an incremental increase will unexpectedly  bring me up to just over 56k, so way over.
I don't know what happens? Have seen reference to self assessment? I've no idea what this is.
To complicate things, I've recently inherited some money that is in savings. I don't really want to lose all the interest to tax, and I think I do if I'm on 40%?
I'm wondering if I need to speak to an accountant, or ifa or someone? 
I have the option of AVCs but I don't want to drop my salary down to 50 grand again really. 
Any thoughts? Suggestions? Help! 

Dazed_and_C0nfused

Leeslady said:

Hi
I work for the NHS, and 40% tax hasn't been on my radar, until suddenly it is. I'm on a few quid over 50 grand, so hovering just under the threshold. 
Our pay award this year, and an incremental increase will unexpectedly  bring me up to just over 56k, so way over.
I don't know what happens? Have seen reference to self assessment? I've no idea what this is.
To complicate things, I've recently inherited some money that is in savings. I don't really want to lose all the interest to tax, and I think I do if I'm on 40%?
I'm wondering if I need to speak to an accountant, or ifa or someone? 
I have the option of AVCs but I don't want to drop my salary down to 50 grand again really. 
Any thoughts? Suggestions? Help! 

I suspect you are overthinking this.

The NHS operate a "net pay" pension scheme so your taxable income is likely to quite a bit less than your salary.

Maybe check your March 2024 payslip to see the difference between salary and taxable pay.

And irrespective of that being liable to higher rate tax isn't in itself a reason to complete a tax return.

[Deleted User]

Do you earn £56k or is your taxable pay after pension contributions £56k. 

You are nowhere near the salary level where a self-assessment return is required. 

Leeslady

Ah right. Thank you. Yes, March 24 payslip shows taxable pay of 48177 against salary of 50952. 
So it's only likely to be a small amount into the 40% tax 

And there's no requirement to do a self assessment just because you're on 40%.

What about if you get several grand of interest on savings? Say 2-3000? Does that change things? 

booneruk

Leeslady said:

I've recently inherited some money that is in savings. I don't really want to lose all the interest to tax, and I think I do if I'm on 40%?

You have a £500 personal savings allowance if you are in the 40% band, so interest over £500 will be taxed at 40%. You'll never lose all of it.

A gentle reminder that you have a 20k ISA allowance per financial year that you can squirrel away savings into (an easy access cash ISA) which keeps all interest away from the taxman.

[Deleted User]

Leeslady said:

Ah right. Thank you. Yes, March 24 payslip shows taxable pay of 48177 against salary of 50952. 
So it's only likely to be a small amount into the 40% tax 

And there's no requirement to do a self assessment just because you're on 40%.

What about if you get several grand of interest on savings? Say 2-3000? Does that change things? 

A WTE of £56000, with pension contributions at 10.7%, leaves taxable salary of £50008. 

You will be required to pay higher rate tax on most of the interest (others will have better knowledge of the notification requirements). 

Put as much as you can into an ISA woukd be the usual advice. 

Leeslady

Thanks all. And is that a new 20grand into ISA every year? Or can you only have one running at a time? 
(You can tell I've been skint for my whole life so far, right?)

booneruk

Leeslady said:

Thanks all. And is that a new 20grand into ISA every year? Or can you only have one running at a time? 
(You can tell I've been skint for my whole life so far, right?)

The 20k allowance renews every new financial year [Usually the 6th of April I believe]. There are some lucky ISA millionaires out there who have been squirrelling away for years!

SiliconChip

Leeslady said:

Thanks all. And is that a new 20grand into ISA every year? Or can you only have one running at a time? 
(You can tell I've been skint for my whole life so far, right?)

£20K every year, either into the same or a new ISA. In fact, from this tax year you can have more than one cash ISA as long as you stick within the limits. I currently have 3 cash ISAs with over £60K in total and 2 S&S ISAs.

https://www.moneysavingexpert.com/savings/best-cash-isa/ 

And if you're willing to accept more risk but with the possibility of higher returns

https://www.moneysavingexpert.com/savings/stocks-shares-isas/

booneruk

booneruk said:

Leeslady said:

Thanks all. And is that a new 20grand into ISA every year? Or can you only have one running at a time? 
(You can tell I've been skint for my whole life so far, right?)

The 20k allowance renews every new financial year [Usually the 6th of April I believe]. There are some lucky ISA millionaires out there who have been squirrelling away for years!

You can also put 50k into premium bonds and shelter that money from tax too

Bookworm105

booneruk said:

Leeslady said:

Thanks all. And is that a new 20grand into ISA every year? Or can you only have one running at a time? 
(You can tell I've been skint for my whole life so far, right?)

The 20k allowance renews every new financial year [Usually the 6th of April I believe]. There are some lucky ISA millionaires out there who have been squirrelling away for years!

whilst squirreling in an ISA is great for a higher rate taxpayer, the max anyone can have invested since ISA started in 1999 is £241,520
even with compounded interest that will be still be short of being a millionaire, but still a significant sum of money for most people and all tax free.