Salary/tax reduction advice

wayspray144

Good afternoon all,

I was wondering if someone could please help me with some accounting advice to help me lower my annual income to prevent me losing my free childcare allowance.

I started a new job towards the end of last year and believe my combined earnings between new and old employers will take me over the £100k mark (not by much). This was due to a bonus paid by my previous employer.

Is it as simple as paying the anticipated over earnings directly into my pension? I.e if I’m anticipating £101k, pay say £1001 into my pension pot? Am I able to do this via debit card straight to my pension or would I need to tell my employer to deduct?

Any advice would be greatly appreciated.
Thanks

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/6654202/salary-tax-reduction-advice

Have you calculated your forecast ANI taking into account any deductions already implemented (work pension / gift aid etc) and any other income (any interest, dividends, etc)?

If making additional pension contributions, it is worth paying more than the barest minimum to give yourself some headroom.

Does your employer allow you to make additional pension contributions via Salary Sacrifice? That is usually the most tax- efficient method when available

Albermarle

What is the situation with your current workplace pension? Presume you are already contributing to that ?

wayspray144

Hi both,

Thanks for your responses.

Yes I’ve done an ANI calculation and expect to be £102,772 - so I basically need to pay £3k into my pension over the next two pays (Feb & March)?

I already contribute £450/month into my pension via salary sacrifice, so am I asking payroll to up to £1950? For next two months?

Let’s say I do nothing, what is the full consequence of losing the childcare allowance? My daughter started day care last September, do I end up paying for all this childcare back? I’m not expecting to earn over £100k for 26/27 tax year so I assume I’m ok to claim again after 5th April?

Thanks

Albermarle

I do not know about the childcare, but your normal pension contribution is pretty low, in % terms anyway.

Unless your employer is putting in a hefty amount, you will struggle in retirement to generate a decent income, especially compared to your current one. Plus your chances of retiring early will be much more limited.

Pension contributions are very tax efficient for higher earners.

wayspray144

My employer matches my contributions - so it’s £900/month