Higher rate income tax relief

RG2015

With the freezing of personal tax allowances up to 2027/2028, I am concerned about breaching the Higher Rate tax threshold.

If my earnings reach £51,270, I will pay 40% tax on £1,000, so I am looking at ways to mitigate this.

I understand that my earnings will include any untaxed interest whether or not it is within my personal savings allowance. Hence I may look to ISAs to help me.

However, I do regularly make charitable contributions and understand that this will help me. For example, with my income above, if I donated £1,000 (gross) with gift aid, would this avoid me paying any income tax at 40%?

Also, could this be claimed retrospectively as HMRC would not have any information in advance of my charitable contibutions?

Dazed_and_C0nfused

RG2015 said:

With the freezing of personal tax allowances up to 2027/2028, I am concerned about breaching the Higher Rate tax threshold.

If my earnings reach £51,270, I will pay 40% tax on £1,000, so I am looking at ways to mitigate this.

I understand that my earnings will include any untaxed interest whether or not it is within my personal savings allowance. Hence I may look to ISAs to help me.

However, I do regularly make charitable contributions and understand that this will help me. For example, with my income above, if I donated £1,000 (gross) with gift aid, would this avoid me paying any income tax at 40%?

Also, could this be claimed retrospectively as HMRC would not have any information in advance of my charitable contibutions?

I'm not convinced it's a given you would pay higher rate tax on £1,000 in your example.

But gross Gift Aid donations of £1,000 would increase your basic rate band from £37,700 to £38,700.

You would need to notify HMRC of the Gift Aid donations.  You can get provisional relief via your tax code if you want.

RG2015

Thanks @Dazed_and_C0nfused

"I'm not convinced it's a given you would pay higher rate tax on £1,000 in your example."

I am curious about what type of (common) income may not form part of my higher rate level. At the moment I have the following which I assume would be included.

Company pension
State pension
SIPP drawdown
Untaxed interest

Dazed_and_C0nfused

RG2015 said:

Thanks @Dazed_and_C0nfused

"I'm not convinced it's a given you would pay higher rate tax on £1,000 in your example."

I am curious about what type of (common) income may not form part of my higher rate level. At the moment I have the following which I assume would be included.

Company pension
State pension
SIPP drawdown
Untaxed interest

If you have that mix of taxable income, totalling  £51,270, then I think £500 of the amount above the basic rate band might be taxed at 0%.

Leaving just £500 actually taxed at 40%. 

For calculation purposes you really just have two income types to consider, the pension income (non savings non dividend) and the interest.  So if £1,000 was interest then I think you would avoid the full £1,000 being taxed at 40%.