Tax/pension advice - who can I get to advise?

rln

Dazed_and_C0nfused said:

rln said:

Thanks for replying..I know it must sound simple but we are really confusing ourselves.

1. Annual salary will be approx 108000 but this includes approx 4000 which is a non pensionable allowance.

2/3. It's a civil service alpha pension. Employee contributions will be 7.35%. they are just taken automatically on the payslip each month... 

4 no gift aid (we do that in my name)

I would really appreciate any additional guidance?

I've calculated that losing the funded hours and tax free childcare will cost us an extra £10k a year which we definitely can't afford. 

Salary is completely irrelevant when it comes to adjusted net income.

Alpha (a net pay scheme) is a simple one, you cannot claim those contributions as a deduction when calculating adjusted net income.  The reason for that is that they are already factored in when establishing his taxable earnings (P60 pay figure).

So using earnings of £108,000 and 7.35% on £104,000 would give you an expected P60 pay figure of £100,536.  That is your starting point.

Next step is what other taxable income does he have?

Note that taxable interest or dividends which are taxed at 0% have to be included here.

Thanks...

So we have no other taxable income . 

Does this mean we only need to reduce his salary by £537 to remain eligible? 

I'm unsure how additional payments to the civil service pension work or what process we need to go through but would doing this solve our problem?

Again, thanks so much for your advice.

TheSpectator

rln said:

Dazed_and_C0nfused said:

rln said:

Thanks for replying..I know it must sound simple but we are really confusing ourselves.

1. Annual salary will be approx 108000 but this includes approx 4000 which is a non pensionable allowance.

2/3. It's a civil service alpha pension. Employee contributions will be 7.35%. they are just taken automatically on the payslip each month... 

4 no gift aid (we do that in my name)

I would really appreciate any additional guidance?

I've calculated that losing the funded hours and tax free childcare will cost us an extra £10k a year which we definitely can't afford. 

Salary is completely irrelevant when it comes to adjusted net income.

Alpha (a net pay scheme) is a simple one, you cannot claim those contributions as a deduction when calculating adjusted net income.  The reason for that is that they are already factored in when establishing his taxable earnings (P60 pay figure).

So using earnings of £108,000 and 7.35% on £104,000 would give you an expected P60 pay figure of £100,536.  That is your starting point.

Next step is what other taxable income does he have?

Note that taxable interest or dividends which are taxed at 0% have to be included here.

Thanks...

So we have no other taxable income . 

Does this mean we only need to reduce his salary by £537 to remain eligible? 

I'm unsure how additional payments to the civil service pension work or what process we need to go through but would doing this solve our problem?

Again, thanks so much for your advice.

So no savings interest at all?  On £100k?

Either look into added pension/AVC's. All the info is on the CS Pension website how to start the process.

rln

Salary has risen rapidly over quite a short period.

We do have some savings but they are in premium bonds as we needed very easy access so I don't believe that needs to be counted?

Will look into avcs and added pension options. I think the issue is just calculating exactly how much and not getting it wrong.

Thank you for your help.

I think we will still need someone to advise as we can't risk getting it wrong. Can anyone advise would a tax accountant be able to help/be more appropriate than an iFA?

Dazed_and_C0nfused

rln said:

Salary has risen rapidly over quite a short period.

We do have some savings but they are in premium bonds as we needed very easy access so I don't believe that needs to be counted?

Will look into avcs and added pension options. I think the issue is just calculating exactly how much and not getting it wrong.

Thank you for your help.

I think we will still need someone to advise as we can't risk getting it wrong. Can anyone advise would a tax accountant be able to help/be more appropriate than an iFA?

Another option is for him to contribute to a personal pension or SIPP.

In his situation this has 4 specific benefits.  He might think added pension or AVC's are a better option but a personal pension or SIPP is often used in this situation.

1.  He builds up a pension pot to use when it suits (probably from age 57 or 58 if he wants).  This can add flexibility to his retirement options.

2.  Whatever he contributes gets 25% added by the pension company (courtesy of HMRC).  So if he pays in £4,000 then he will end up with a gross contribution of £5,000

3.  The gross contribution increases his basic rate band by £5,000, meaning more of his income is taxed at 20% and less at 40%.

4.  The gross contribution reduces his adjusted net income by £5,000.  This can help him retain his full Personal Allowance and with the childcare aspect you originally posted about.

This can be a very tax efficient way of getting money into a pension.  From your original post it seems that he would effectively be getting more than 100% tax relief on extra pension contributions because of the cliff edge nature of the childcare aspect.

Premium bonds prizes are exempt from tax so not relevant here.

But does he genuinely not receive any taxable interest?  Presumably his wages are paid into a bank account, they can't be used to directly buy Premium Bonds!!

One thing he will have to consider is the pension annual allowance.  This is now £60k but the calculation for defined benefit schemes like Alpha is unrelated to the actual contributions and can be surprisingly high.  Google pension input amount for DB pensions.

rln

Dazed_and_C0nfused said:

rln said:

Salary has risen rapidly over quite a short period.

We do have some savings but they are in premium bonds as we needed very easy access so I don't believe that needs to be counted?

Will look into avcs and added pension options. I think the issue is just calculating exactly how much and not getting it wrong.

Thank you for your help.

I think we will still need someone to advise as we can't risk getting it wrong. Can anyone advise would a tax accountant be able to help/be more appropriate than an iFA?

Another option is for him to contribute to a personal pension or SIPP.

In his situation this has 4 specific benefits.  He might think added pension or AVC's are a better option but a personal pension or SIPP is often used in this situation.

1.  He builds up a pension pot to use when it suits (probably from age 57 or 58 if he wants).  This can add flexibility to his retirement options.

2.  Whatever he contributes gets 25% added by the pension company (courtesy of HMRC).  So if he pays in £4,000 then he will end up with a gross contribution of £5,000

3.  The gross contribution increases his basic rate band by £5,000, meaning more of his income is taxed at 20% and less at 40%.

4.  The gross contribution reduces his adjusted net income by £5,000.  This can help him retain his full Personal Allowance and with the childcare aspect you originally posted about.

This can be a very tax efficient way of getting money into a pension.  From your original post it seems that he would effectively be getting more than 100% tax relief on extra pension contributions because of the cliff edge nature of the childcare aspect.

Premium bonds prizes are exempt from tax so not relevant here.

But does he genuinely not receive any taxable interest?  Presumably his wages are paid into a bank account, they can't be used to directly buy Premium Bonds!!

One thing he will have to consider is the pension annual allowance.  This is now £60k but the calculation for defined benefit schemes like Alpha is unrelated to the actual contributions and can be surprisingly high.  Google pension input amount for DB pensions.

Thanks so much 

A SIPP was something we were looking at and maybe that would be the best option. We were caught by the pension allowance previously when the limit was 40k so I suspect this will be an issue with the salary increase and/or making additional contributions.

I definitely think we need an advisor to help navigate these areas. The last thing we need is to end up with a big unexpected tax bill because we've made a mistake or misunderstood something.

I'll double check on the interest .. if anything it would be a tiny amount. Salary goes into a current account and then almost straight back out to pay childcare/mortgage/credit card. We live in the south east so outgoings are large, especially with 3 under 5!

Albermarle

rln said:

Salary has risen rapidly over quite a short period.

We do have some savings but they are in premium bonds as we needed very easy access so I don't believe that needs to be counted?

Will look into avcs and added pension options. I think the issue is just calculating exactly how much and not getting it wrong.

Thank you for your help.

I think we will still need someone to advise as we can't risk getting it wrong. Can anyone advise would a tax accountant be able to help/be more appropriate than an iFA?

The issue does not need advice from a tax accountant, it is basic stuff and there would not be enough work for one.
Have a good read through this forum and the pensions one Pensions, annuities & retirement planning — MoneySavingExpert Forum and you will see the same subject come up at regular intervals.
Then reread the very helpful replies from D&C and then feel free to ask more questions.