Long term planning - reduce tax bill

sheramber

https://forums.moneysavingexpert.com/discussion/comment/81981201#Comment_81981201

Not if he is a higher rate taxpayer.

Yorkie1

If you're looking at cash savings rather than investments, do you have any funds in premium bonds? Not a guaranteed return, but whatever you get is tax free

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/6665998/long-term-planning-reduce-tax-bill

Quite a few of the things you mention aren't saving you any tax at all.

They may be very sensible things to be doing but aren't achieving what you seem to be primarily focused on.

kermchem

Just spotted that OP is putting the annual allowance of £60k per year into his pension and that because he earns over £100k they do not get any childcare assistance. Just checking, is that over £100k income after the pension contributions?

mither_2

Thanks to everyone for their help and suggestions.

My thinking is to just keep paying as much as I can into my pension and encourage my wife to put in as much as she can. If I pay for everything the she has less need for her pension and can do so.

"Paying into a pension does not reduce your tax liability as such, it is more about getting tax relief paid into your pension. She could add more to her workplace pension or a personal pension, but as she is reducing her hours further, her reduced income will limit how much she can add to either of course."

My undestanding is that there is a tax benefit as any money I pay into my pension via salary sacrific reduces my taxable income and also I don't pay any NI on the amount? When I come to take it out I'll have to pay tax but this (hopefully) will be a lower rate than the 40/%45% that I woudl pay on it now. There is also the potential to take a tax free lump sum.

Of course this is all subject to changes to the pension rules, which are quite possible in the intervening 15 - 20 years.

Have I misunderstood anything here?

I also did some reading on SEIS. Too complicated and risky for me.

mither_2

https://forums.moneysavingexpert.com/discussion/comment/81986042#Comment_81986042

Yes, this year anyway. Mostly my sdalary would be lower and so I would put enough in my pension to take my taxable income below £100k and so receive some free childcare hours.

mither_2

How are they not? Please can you expand. I'm not doubting you, I jsut want to undertans better. My assumption is that salary sacrifice copntributiosn into my pension and having money in ISAs (combination of cash ISAs and S&S ISAs) rather than taxable interest accounts would be more tax efficient?

mither_2

My wife is still in her 30s and so can open a lifetime ISA. They seem pretty good to me. Is there a catch that I'm missing?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82000283#Comment_82000283

I think he is coming at this from a does it get a tax deduction point of view. Yes salary sacrifice pension contributions reduce your salary and so you pay tax on a lower amount than otherwise so that saves you tax. But contributing to an ISA of itself does not get you a tax deduction. Yes any income or gains in the ISA are outside of tax but paying £20k into an ISA doesn't get you a £20k tax deduction.

Investing in VCTs EIS or SEIS would get you a tax deduction but you may never see that money again.

Charitable giving using Gift Aid would get you a tax deduction but of course that means giving money away. That may go against the grain. But there are some memberships which can use gift aid (National Trust?) or if you visit somewhere like Kew Gardens or Hampton Court you may be able to claim the price of the ticket.

ETA - I will probably get pulled up on the gift aid bit - it will increase your higher rate tax threshold so not actually a tax deduction as such. Just more income taxed at a lower rate.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82000295#Comment_82000295

Penalties on withdrawal, meaning you get less back than you put in, unless withdrawal is for buying your first home or retirement. Retirement may seem a long way away when you are in your 30s.