How to get round 60% tax issue

Dazed_and_C0nfused

sultan123 said:

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?

You should sacrifice what you think is appropriate, not what random people on the internet say.

Extra pension contributions on your salary level are very tax efficient and, subject to investment choices within the pension, will give you a better retirement income.

But if you are happy paying less, paying as much 40% tax as you can and having a poorer retirement that is your choice.

HedgehogRulez

Why not just put £60k into pension each year? Save yourself a load of tax…

BikingBud

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

And see when you can retire, rather than continually flogging yourself.

sultan123

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

Grumpy_chap

sultan123 said:

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

No. Not disposable income.

The £60k is gross pension contributions including employer plus employee contributions.

You earn a little over £100k, so the employer contribution (you said 10%) is a little over £10k.

That leaves a little under £50k for you to contribute.
Most of that would be from the 40% tax band (assume you live in England).   It will cost you a bit under £30k from nett income.

sultan123

Grumpy_chap said:

sultan123 said:

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

No. Not disposable income.

The £60k is gross pension contributions including employer plus employee contributions.

You earn a little over £100k, so the employer contribution (you said 10%) is a little over £10k.

That leaves a little under £50k for you to contribute.
Most of that would be from the 40% tax band (assume you live in England).   It will cost you a bit under £30k from nett income.

Sorry I meant will it not affect my disposable income a lot.

I mean how much % is that each month I would need to put in to get that extra 50k

Also pension investments can go up and down no?

Dazed_and_C0nfused

sultan123 said:

Grumpy_chap said:

sultan123 said:

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

No. Not disposable income.

The £60k is gross pension contributions including employer plus employee contributions.

You earn a little over £100k, so the employer contribution (you said 10%) is a little over £10k.

That leaves a little under £50k for you to contribute.
Most of that would be from the 40% tax band (assume you live in England).   It will cost you a bit under £30k from nett income.

Sorry I meant will it not affect my disposable income a lot.

I mean how much % is that each month I would need to put in to get that extra 50k

Also pension investments can go up and down no?

If you are using salary sacrifice then you have to sacrifice £50k of your salary to get £50k into your pension as that is an employer contribution and no tax relief is added within the pension fund.

sultan123

Dazed_and_C0nfused said:

sultan123 said:

Grumpy_chap said:

sultan123 said:

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

No. Not disposable income.

The £60k is gross pension contributions including employer plus employee contributions.

You earn a little over £100k, so the employer contribution (you said 10%) is a little over £10k.

That leaves a little under £50k for you to contribute.
Most of that would be from the 40% tax band (assume you live in England).   It will cost you a bit under £30k from nett income.

Sorry I meant will it not affect my disposable income a lot.

I mean how much % is that each month I would need to put in to get that extra 50k

Also pension investments can go up and down no?

If you are using salary sacrifice then you have to sacrifice £50k of your salary to get £50k into your pension as that is an employer contribution and no tax relief is added within the pension fund.

Why would no tax relief be given?

Grumpy_chap

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Grumpy_chap said:

sultan123 said:

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

No. Not disposable income.

The £60k is gross pension contributions including employer plus employee contributions.

You earn a little over £100k, so the employer contribution (you said 10%) is a little over £10k.

That leaves a little under £50k for you to contribute.
Most of that would be from the 40% tax band (assume you live in England).   It will cost you a bit under £30k from nett income.

Sorry I meant will it not affect my disposable income a lot.

I mean how much % is that each month I would need to put in to get that extra 50k

Also pension investments can go up and down no?

If you are using salary sacrifice then you have to sacrifice £50k of your salary to get £50k into your pension as that is an employer contribution and no tax relief is added within the pension fund.

Why would no tax relief be given?

Because the employer contributions are paid before tax is paid.

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Grumpy_chap said:

sultan123 said:

HedgehogRulez said:

Why not just put £60k into pension each year? Save yourself a load of tax…

disposable income? 60k would mean huge monthly salary sacrifice from me even if employer putting in 10%?

No. Not disposable income.

The £60k is gross pension contributions including employer plus employee contributions.

You earn a little over £100k, so the employer contribution (you said 10%) is a little over £10k.

That leaves a little under £50k for you to contribute.
Most of that would be from the 40% tax band (assume you live in England).   It will cost you a bit under £30k from nett income.

Sorry I meant will it not affect my disposable income a lot.

I mean how much % is that each month I would need to put in to get that extra 50k

Also pension investments can go up and down no?

If you are using salary sacrifice then you have to sacrifice £50k of your salary to get £50k into your pension as that is an employer contribution and no tax relief is added within the pension fund.

Why would no tax relief be given?

Because no pension tax relief is available to the employee on employer contributions.

But you don't have the salary to pay tax or NI on so the net cost to the employee is far less than £50k