Higher tax band - NHS worker

Nuggy96

I've moved into the NHS in the past couple of years and top of band 7, soon to be earning £52,800 a year which will push me into the 40% tax bracket. This means my PSA will drop to £500 and I'll be taxed 40% on all the interest I earn after that. I'm currently projected to earn over £1100 in interest this financial year. With the NHS pension working slightly different I assume I can't salary sacrifice into my pension to go down a tax bracket. Any ideas or suggestions on how to go down a tax bracket? (Without taking pay cut :P)

Mark_d

I don't know how the NHS pension works but you don't need salary sacrifice.  SS only serves to save you National Insurance.

Potentially you can make AVCs in your NHS pension.  This would be simplest.  Otherise you can contribute to a SIPP

Nuggy96

Mark_d said:

I don't know how the NHS pension works but you don't need salary sacrifice.  SS only serves to save you National Insurance.

Potentially you can make AVCs in your NHS pension.  This would be simplest.  Otherise you can contribute to a SIPP

I thought only salary sacrifice worked for dropping down tax bands as it's BEFORE tax/NI get paid, or am I wrong, sorry in my 20s so pension knowledge is substandard!

Also heard that overpaying NHS pensions is really rubbish(?) Again unsure

SacredStephan

Are you are in the 2015 pension scheme, and contributing 10.7% of salary (it will say on your payslip)?

If so, you should deduct your pension contributions from your gross salary before doing any tax calculations. You may find that you are still a basic rate taxpayer.

ColdIron

If you make a pension contribution with taxable income HMRC will extend your basic rate band by the gross amount effectively raising your higher tax threshold above £50,270. This could take you out of HRT and restore your PSA

In your example: £52,800 + £1,100 = £53,900 - £50,270 = £3,630

If you made a £3,630 gross contribution (£2,904 from you and £726 tax relief) into a SIPP, or possibly AVCs via the NHS to keep it simple, it should take you out of HRT

Run your numbers again once you are confident with the amounts to avoid an errant quid spoiling your plans

Nuggy96

SacredStephan said:

Are you are in the 2015 pension scheme, and contributing 10.7% of salary (it will say on your payslip)?

If so, you should deduct your pension contributions from your gross salary before doing any tax calculations. You may find that you are still a basic rate taxpayer.

Ahh I'm an idiot, forgot about the 10.7% I was contributing already... Yes, so that does take me below the tax band. Thank you

Nuggy96

ColdIron said:

If you make a pension contribution with taxable income HMRC will extend your basic rate band by the gross amount effectively raising your higher tax threshold above £50,270. This could take you out of HRT and restore your PSA

In your example: £52,800 + £1,100 = £53,900 - £50,270 = £3,630

If you made a £3,630 gross contribution (£2,904 from you and £726 tax relief) into a SIPP, or possibly AVCs via the NHS to keep it simple, it should take you out of HRT

Run your numbers again once you are confident with the amounts to avoid an errant quid spoiling your plans

Ahh OK, so I have a SIPP with vanguard currently. But I have never actually paid into it manually (I transferred it in from Standard Life from my previous job). When I pay into Vanguard SIPP do I need to inform HMRC manually to get the tax rebate, or how does this work? Thanks in advance

SacredStephan

For every £80 you pay in, Vanguard will claim £20 in basic rate tax relief and add it to your pot.

Also, if you haven't done so already you should apply to HMRC for the agreed allowance for uniform laundry (if you wear a uniform for work), socks/tights and shoes and professional subscriptions. The RCN has a template form for this. This will increase your personal allowance and reduce the amount of tax you pay.

ColdIron

Nuggy96 said:

ColdIron said:

If you make a pension contribution with taxable income HMRC will extend your basic rate band by the gross amount effectively raising your higher tax threshold above £50,270. This could take you out of HRT and restore your PSA

In your example: £52,800 + £1,100 = £53,900 - £50,270 = £3,630

If you made a £3,630 gross contribution (£2,904 from you and £726 tax relief) into a SIPP, or possibly AVCs via the NHS to keep it simple, it should take you out of HRT

Run your numbers again once you are confident with the amounts to avoid an errant quid spoiling your plans

Ahh OK, so I have a SIPP with vanguard currently. But I have never actually paid into it manually (I transferred it in from Standard Life from my previous job). When I pay into Vanguard SIPP do I need to inform HMRC manually to get the tax rebate, or how does this work? Thanks in advance

Vanguard will apply basic rate tax relief automatically but you will need to inform HMRC regarding the higher rate relief. I do it via self assessment but you can do it via your HMRC personal tax account I believe

Dazed_and_C0nfused

Nuggy96 said:

ColdIron said:

If you make a pension contribution with taxable income HMRC will extend your basic rate band by the gross amount effectively raising your higher tax threshold above £50,270. This could take you out of HRT and restore your PSA

In your example: £52,800 + £1,100 = £53,900 - £50,270 = £3,630

If you made a £3,630 gross contribution (£2,904 from you and £726 tax relief) into a SIPP, or possibly AVCs via the NHS to keep it simple, it should take you out of HRT

Run your numbers again once you are confident with the amounts to avoid an errant quid spoiling your plans

Ahh OK, so I have a SIPP with vanguard currently. But I have never actually paid into it manually (I transferred it in from Standard Life from my previous job). When I pay into Vanguard SIPP do I need to inform HMRC manually to get the tax rebate, or how does this work? Thanks in advance

Unless you have other taxable income not previously disclosed (or are Scottish resident) you won't really be anywhere that near being a higher rate payer and any relief at source (RAS) contributions will simply get the 25% the pension provider automatically adds.

There won't be any personal tax saving for you to need to contact HMRC about.

NHS taxable earnings £47,150
Interest £1,100
Total taxable income £48,250