How to get round 60% tax issue

400ixl

sultan123 said:

400ixl said:

£103k + £12-15k bonus + taxable benefits + taxable interest - Pension already sacrificed will give you a reasonably close estimate of how much you are over the £100k. That will be the additional amount you ned to sacrifice if anything.

What % do I salary sacrifice into pension out of 103k to get it to 99k.

Aware of bonus but that will all,go into bonus anyway

You keep asking the same question which has been answered, but is not the right value as your bonus and other taxable income make it more than £103k to be reduced to get your total income including  bonus under the £100k.

poppystar

Am I missing something but I thought the highest rate of tax was 45%? 

TheSpectator

poppystar said:

Am I missing something but I thought the highest rate of tax was 45%? 

It is but because you start losing your personal allowance at over £100k then the actual impact is more in your pocketm

Nomunnofun1

poppystar said:

Am I missing something but I thought the highest rate of tax was 45%? 

The effect of losing your personal allowance and paying 40% tax on income between £100000 and 125140 is 60% overall rate on that slice. 

sultan123

Dazed_and_C0nfused said:

sultan123 said:

Grumpy_chap said:

From £103k to get to £99k (under £100k) is £4k to SS.
Assuming no other income.
Assuming SS is available.
Assuming available annual allowance.
It may be too late if considering the current tax year.

Thanks this new wage kicks in from May.

If I am not allowed to put bonus into pension can I still manage by putting it into SIPP?

Yes, more complicated but has same impact for adjusted net income purposes.

So say bonus was paid to me and I got taxed 62% on it, could I then still put the gross amount back into sipp and get a tax refund?

sultan123

Dazed_and_C0nfused said:

sultan123 said:

400ixl said:

£103k + £12-15k bonus + taxable benefits + taxable interest - Pension already sacrificed will give you a reasonably close estimate of how much you are over the £100k. That will be the additional amount you ned to sacrifice if anything.

What % do I salary sacrifice into pension out of 103k to get it to 99k.

Aware of bonus but that will all,go into bonus anyway

By my count 103 minus 99 = 4.

But the fact you are asking what the sum of of 103 minus 99 is suggests there is more to your question

Oh sorry are you saying 4%?

Grumpy_chap

Dazed_and_C0nfused said:

By my count 103 minus 99 = 4.

That may have come from my comment upthread.
The OP wanted to be below £100k, so £99k is the largest whole number that achieves that, makes thing simple and gives some grace in case the end of year starting number comes out not quite exactly £103k.
Taking things literally, the OP could SS £3000.01 and achieve the "below £100K" assuming the start point was exactly £103k.
I would not work to such close margins.

I agree, there is something else here as I really would expect most people capable of earning £103k to be able to do the maths to work out what the amount is to SS to get below £100k, or to work out the percentage of £103k to SS to get to £99k.

Maybe the real question is whether £4k SS gets from £103k to £99k - quite possible if the OP was thinking it was possible to SS less than £4k but then receive tax relief back on top.  SS is actually very simple in that regard.

For reference, the £4k from £103k as a percentage to SS is 3.9%.  Simple calculation of £4k divided by £103k.

FWIW, the OP may wish to review their total pension contribution and ensure that the level of contribution being made is sufficient to provide an adequate level of funding for the lifestyle that the OP desires once retired.  I suspect, for someone with £103k base income, a pension of employee's plus employer's auto-enrolment levels plus the extra £4k will not build a pension fund sufficient to meet the level of retirement income desired.

DRS1

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Grumpy_chap said:

From £103k to get to £99k (under £100k) is £4k to SS.
Assuming no other income.
Assuming SS is available.
Assuming available annual allowance.
It may be too late if considering the current tax year.

Thanks this new wage kicks in from May.

If I am not allowed to put bonus into pension can I still manage by putting it into SIPP?

Yes, more complicated but has same impact for adjusted net income purposes.

So say bonus was paid to me and I got taxed 62% on it, could I then still put the gross amount back into sipp and get a tax refund?

62% ? Is that including NICs?  You only save on the NICs by salary sacrificing, I think.  If you pay into a SIPP you do not save on the NICs

Paying into a SIPP is the time when you multiply your gross contribution by 80% to get how much you actually pay to the SIPP with the other 20% being claimed by the SIPP from HMRC.  So if your bonus is £12k and you want a gross contribution of £12k to the SIPP you pay £9600 and the SIPP claims the other £2400 from HMRC.

You then put your gross £12k contribution on your tax return or report it using the new online tool and that should somehow deal with the rest of your tax relief.

Dazed_and_C0nfused

poppystar said:

Am I missing something but I thought the highest rate of tax was 45%? 

Scottish residents have a 48% rate at the moment.

The 60% referenced is a combination of 40% tax plus loss of Personal Allowance where the 2:1 taper kicks in.

So £2 of extra adjusted net income can mean the loss of £1 in Personal Allowance.  Adding £1 to the income being taxed at 40%.  But because it was £2 of income that caused the loss of £1 in Personal Allowance it is an effective rate of 20%.

So the 40% + 20% = 60%

sultan123

Grumpy_chap said:

Dazed_and_C0nfused said:

By my count 103 minus 99 = 4.

That may have come from my comment upthread.
The OP wanted to be below £100k, so £99k is the largest whole number that achieves that, makes thing simple and gives some grace in case the end of year starting number comes out not quite exactly £103k.
Taking things literally, the OP could SS £3000.01 and achieve the "below £100K" assuming the start point was exactly £103k.
I would not work to such close margins.

I agree, there is something else here as I really would expect most people capable of earning £103k to be able to do the maths to work out what the amount is to SS to get below £100k, or to work out the percentage of £103k to SS to get to £99k.

Maybe the real question is whether £4k SS gets from £103k to £99k - quite possible if the OP was thinking it was possible to SS less than £4k but then receive tax relief back on top.  SS is actually very simple in that regard.

For reference, the £4k from £103k as a percentage to SS is 3.9%.  Simple calculation of £4k divided by £103k.

FWIW, the OP may wish to review their total pension contribution and ensure that the level of contribution being made is sufficient to provide an adequate level of funding for the lifestyle that the OP desires once retired.  I suspect, for someone with £103k base income, a pension of employee's plus employer's auto-enrolment levels plus the extra £4k will not build a pension fund sufficient to meet the level of retirement income desired.

So I should salary sacrifice 4% into pension?

Employer puts in 10%. Are you saying 14% is not a good enough fund?