Tax confusion

caromary1056

Hi I’d be grateful if anyone can help me out please, I’m trying to bring myself within the basic rate tax bracket.

i took early retirement and have a company pension income of £17,027.92 pa tax code BR.

recently I started a new job 
salary £60k plus car allowance £5,610.

I’ve bought some holiday which I think will reduce tax reducing my income by £923.28 pa.

60000.00
17017.92
  5610.00
—————-
82627.92 total
    923.28 holiday buy
—————-
81704.64 income 

I also have married persons allowance of £1260. I’ve worked out that I’d need to put £30,174.64. Pa into a company pension to stop paying 40%tax. 

Does this sound right as it seems an awful lot to me and would appreciate any guidance with my figures as I’m so confused.

many thanks 

caromary1056

My tax code is 1383M on my new job

eskbanker

caromary1056 said:

I also have married persons allowance of £1260.

Not if you're a higher rate taxpayer....

caromary1056

eskbanker said:

caromary1056 said:

I also have married persons allowance of £1260.

Not if you're a higher rate taxpayer....

Thank you. So do I need to give that allowance back to my husband then? I had hoped I could keep under the high rate threshold and keep the marriage allowance and put some earnings into a company pension…hopefully 

[Deleted User]

Income of £81704 attracts income of £31434 at 40%. 

You could put £25147 into a SIPP which will be grossed up by HMRC to £31434 (give yourself some leeway). 

You can then claim additional tax relief from HMRC of £6286. 

caromary1056

[Deleted User] said:

Income of £81704 attracts income of £31434 at 40%. 

You could put £25147 into a SIPP which will be grossed up by HMRC to £31434 (give yourself some leeway). 

You can then claim additional tax relief from HMRC of £6286. 

Thank you. I will have a look at SIPPs it’s something I hadn’t considered at all. My only thoughts where to contribute each month to my new employers pension scheme via salary sacrifice to keep under the 40%

Albermarle

caromary1056 said:

[Deleted User] said:

Income of £81704 attracts income of £31434 at 40%. 

You could put £25147 into a SIPP which will be grossed up by HMRC to £31434 (give yourself some leeway). 

You can then claim additional tax relief from HMRC of £6286. 

Thank you. I will have a look at SIPPs it’s something I hadn’t considered at all. My only thoughts where to contribute each month to my new employers pension scheme via salary sacrifice to keep under the 40%

If you have a salary sacrifice arrangement with your new employer then contributing via that route would be easier, as you would get the full tax benefit automatically ( by never paying it in the first place) and a small NI benefit.
Some employers will even increase their contribution if you increase yours ( to a point) - worth checking that.

caromary1056

Albermarle said:

caromary1056 said:

[Deleted User] said:

Income of £81704 attracts income of £31434 at 40%. 

You could put £25147 into a SIPP which will be grossed up by HMRC to £31434 (give yourself some leeway). 

You can then claim additional tax relief from HMRC of £6286. 

Thank you. I will have a look at SIPPs it’s something I hadn’t considered at all. My only thoughts where to contribute each month to my new employers pension scheme via salary sacrifice to keep under the 40%

If you have a salary sacrifice arrangement with your new employer then contributing via that route would be easier, as you would get the full tax benefit automatically ( by never paying it in the first place) and a small NI benefit.
Some employers will even increase their contribution if you increase yours ( to a point) - worth checking that.

Ok thanks think salary sacrifice through company pension sounds easiest route. Do you think I’m correct with my figures and needing to put £30,174.64 into the pension pa to avoid being a 40% tax payer please?

Strummer22

caromary1056 said:

eskbanker said:

caromary1056 said:

I also have married persons allowance of £1260.

Not if you're a higher rate taxpayer....

Thank you. So do I need to give that allowance back to my husband then? I had hoped I could keep under the high rate threshold and keep the marriage allowance and put some earnings into a company pension…hopefully 

If you put sufficient into a company pension or use other tax allowances (e.g. gift aid) to get your adjusted net income below £50,270, you get to keep the marriage allowance. 

DRS1

caromary1056 said:

Albermarle said:

caromary1056 said:

[Deleted User] said:

Income of £81704 attracts income of £31434 at 40%. 

You could put £25147 into a SIPP which will be grossed up by HMRC to £31434 (give yourself some leeway). 

You can then claim additional tax relief from HMRC of £6286. 

Thank you. I will have a look at SIPPs it’s something I hadn’t considered at all. My only thoughts where to contribute each month to my new employers pension scheme via salary sacrifice to keep under the 40%

If you have a salary sacrifice arrangement with your new employer then contributing via that route would be easier, as you would get the full tax benefit automatically ( by never paying it in the first place) and a small NI benefit.
Some employers will even increase their contribution if you increase yours ( to a point) - worth checking that.

Ok thanks think salary sacrifice through company pension sounds easiest route. Do you think I’m correct with my figures and needing to put £30,174.64 into the pension pa to avoid being a 40% tax payer please?

I think that puts you on £51530 which is still in higher rate territory.  You need another £1260. (That is gross so depending on how you contribute you may want to multiply the amount by 0.8 to get what you actually contribute)

Do you already contribute to a pension?

If you want to do it this tax year there aren't many days left.  Is it already too late for salary sacrifice?  Does that need a payroll run?

caromary1056

DRS1 said:

caromary1056 said:

Albermarle said:

caromary1056 said:

[Deleted User] said:

Income of £81704 attracts income of £31434 at 40%. 

You could put £25147 into a SIPP which will be grossed up by HMRC to £31434 (give yourself some leeway). 

You can then claim additional tax relief from HMRC of £6286. 

Thank you. I will have a look at SIPPs it’s something I hadn’t considered at all. My only thoughts where to contribute each month to my new employers pension scheme via salary sacrifice to keep under the 40%

If you have a salary sacrifice arrangement with your new employer then contributing via that route would be easier, as you would get the full tax benefit automatically ( by never paying it in the first place) and a small NI benefit.
Some employers will even increase their contribution if you increase yours ( to a point) - worth checking that.

Ok thanks think salary sacrifice through company pension sounds easiest route. Do you think I’m correct with my figures and needing to put £30,174.64 into the pension pa to avoid being a 40% tax payer please?

I think that puts you on £51530 which is still in higher rate territory.  You need another £1260. (That is gross so depending on how you contribute you may want to multiply the amount by 0.8 to get what you actually contribute)

Do you already contribute to a pension?

If you want to do it this tax year there aren't many days left.  Is it already too late for salary sacrifice?  Does that need a payroll run?

Thanks, I’m well under for this year as only recently started working again. Thinking of next tax year. I’m only contributing £250 a month to match the max that my employer contributes but realise this won’t be enough for new tax year to keep as a basic rate tax payer.  Please can you explain the £51,530 figure? Many thanks