Tax confusion

[Deleted User]

caromary1056 said:

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 

From your op - £81704 minus £30174 

caromary1056

Am I correct in thinking that any earnings over £51,530 would be taxed at 40%? Thank you 

DRS1

Normally any earnings over £50270 are taxed at 40% (or more).  But you may have done something to extend your basic rate band above that - eg a certain type of pension contributions or gift aid.

[Deleted User]

DRS1 said:

Normally any earnings over £50270 are taxed at 40% (or more).  But you may have done something to extend your basic rate band above that - eg a certain type of pension contributions or gift aid.

The £51350 indicated by the op is achieved by adding marriage allowance of £1260 to the normal £50270. 

As you know adjusted net income must be below £50270 in order to be able to receive any transfer from spouse. 

The op must either salary sacrifice £31434 to reduce income below £50270 or contribute to a SIPP as I detailed earlier. 

sheramber

Marriage Allowance transfer does not give you extra personal allowances.

It gives you a credit of £252 deducted from your tax liability.

You work out your liability  without it then deduct £252 from that total if you are entitled to it.

You must be liable to  basic ratre tax only before Marriage Transfer Allowance is claimed.



It is shown as increased personal allowance in your tax code to facilitate the correct tax being deducted.

caromary1056

Thank you for all the help and time from all your posts to me, I have concluded this, please kindly review and let me know if this sounds about right please. Thanks again.                            salary: £60,000 - Car allowance: £5,610 - Company pension: £17,027.92 - Less salary sacrifice (holiday buy): -£923.28 Total income: £81,714.64                                           Allowances: - Personal allowance: £12,570 - Married Couple’s Transfer: £1,260 Total allowance: £13,830                                    Taxable Income: £81,714.64 – £13,830 = £67,884.64                                                         To reduce this to £50,270, need to lower my taxable income by: £67,884.64 – £50,270 = £17,614.64                                                              I would need to contribute approximately £17,615 per year into a salary sacrifice pension to stay within the 20%….

TheSpectator

caromary1056 said:

Thank you for all the help and time from all your posts to me, I have concluded this, please kindly review and let me know if this sounds about right please. Thanks again.                            salary: £60,000 - Car allowance: £5,610 - Company pension: £17,027.92 - Less salary sacrifice (holiday buy): -£923.28 Total income: £81,714.64                                           Allowances: - Personal allowance: £12,570 - Married Couple’s Transfer: £1,260 Total allowance: £13,830                                    Taxable Income: £81,714.64 – £13,830 = £67,884.64                                                         To reduce this to £50,270, need to lower my taxable income by: £67,884.64 – £50,270 = £17,614.64                                                              I would need to contribute approximately £17,615 per year into a salary sacrifice pension to stay within the 20%….

You have totally ignored the post by sheramber at 9.25am today.

Dazed_and_C0nfused

caromary1056 said:

Thank you for all the help and time from all your posts to me, I have concluded this, please kindly review and let me know if this sounds about right please. Thanks again.                            salary: £60,000 - Car allowance: £5,610 - Company pension: £17,027.92 - Less salary sacrifice (holiday buy): -£923.28 Total income: £81,714.64                                           Allowances: - Personal allowance: £12,570 - Married Couple’s Transfer: £1,260 Total allowance: £13,830                                    Taxable Income: £81,714.64 – £13,830 = £67,884.64                                                         To reduce this to £50,270, need to lower my taxable income by: £67,884.64 – £50,270 = £17,614.64                                                              I would need to contribute approximately £17,615 per year into a salary sacrifice pension to stay within the 20%….

You do not get any extra allowances from being the recipient of Marriage Allowance, it is a tax reducer.  As @sheramber previously explained

[Deleted User]

caromary1056 said:

Thank you for all the help and time from all your posts to me, I have concluded this, please kindly review and let me know if this sounds about right please. Thanks again.                            salary: £60,000 - Car allowance: £5,610 - Company pension: £17,027.92 - Less salary sacrifice (holiday buy): -£923.28 Total income: £81,714.64                                           Allowances: - Personal allowance: £12,570 - Married Couple’s Transfer: £1,260 Total allowance: £13,830                                    Taxable Income: £81,714.64 – £13,830 = £67,884.64                                                         To reduce this to £50,270, need to lower my taxable income by: £67,884.64 – £50,270 = £17,614.64                                                              I would need to contribute approximately £17,615 per year into a salary sacrifice pension to stay within the 20%….

No - you have included the personal allowance twice - once by deducted it from the income and also by including it in the £50270. 

Your income is £81714

This is £31444 into higher rates - salary sacrifice amount required. 

TheSpectator

Speak to a tax advisor as you are just not getting it.