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Salary Package Advice

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  • Grumpy_chap
    Grumpy_chap Posts: 18,294 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Putting the OP's wrong assumptions to one side, as 45% tax is charged on income over £75k in Scotland you should be looking to mitigate this as far as possible.
    BUT, to mitigate that tax liability is not aligned with the OP's parallel objective to maximise take home pay.  The two cannot be achieved simultaneously, especially when the use of pension contributions seems to be the most powerful tool in the bag.
  • Scotslad87
    Scotslad87 Posts: 22 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    Putting the OP's wrong assumptions to one side, as 45% tax is charged on income over £75k in Scotland you should be looking to mitigate this as far as possible.
    Yes, thank you. 

    This was the basis of my original question. I guess I should seek professional help on managing this. 
  • Grumpy_chap
    Grumpy_chap Posts: 18,294 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Putting the OP's wrong assumptions to one side, as 45% tax is charged on income over £75k in Scotland you should be looking to mitigate this as far as possible.
    Yes, thank you. 

    This was the basis of my original question. I guess I should seek professional help on managing this. 
    OK, so the question is not how to maximise take home pay, but how to mitigate ANI (annual net income) exceeding £75k where the tax level is higher than the OP finds comfortable.

    Scotslad87 said:

    Base Annual Salary: £95000
    Monthly Car Allowance: £535
    Annual Bonus: £20000 (Paid as a lump sum in May)

    The car allowance equals £6,420 per year so the OP's annual income is £121,420 per year.  The OP needs to add to that any income from other sources such as bank / savings account interest.

    Pension contributions are the most advantageous way to mitigate this higher rate tax liability above the £75k threshold.
    The most efficient way to achieve that, and the amount to be contributed will depend on the options available to the OP.  Is the OP able to use Salary Sacrifice?  If so, that is likely to be the most tax efficient process.
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