How to get round 60% tax issue

EnPointe

poppystar said:

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

it's the impact of losing personal allowance  between 100 and 125k  taxable income as it moves more of your income into  being taxable

Grumpy_chap

EnPointe said:

poppystar said:

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

it's the impact of losing personal allowance  between 100 and 125k  taxable income as it moves more of your income into  being taxable

62% if employee NI is also considered.
Higher if in Scotland.

sultan123

Dazed_and_C0nfused said:

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

How much % do I need to sacrifice each month to put in 50k?

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

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

How much % do I need to sacrifice each month to put in 50k?

You need to sacrifice £50k across the whole of a tax year to get £50k into your pension.

Grumpy_chap

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

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

How much % do I need to sacrifice each month to put in 50k?

You need to sacrifice £50k across the whole of a tax year to get £50k into your pension.

The OP needs to be sure of the exact amount available to be contributed by SS so as to not exceed AA.  OP states they earn £103k and employer contributions are 10% so the OP has just under £50k remaining AA.  Assume no carry forward available.

If the calculation is beyond the OP's capability then, especially given their income level, they may be advised to engage the professional service of an Accountant to be sure of the correct contribution rate.