Cash

markharriers

The Figures i stated above for the CGT were just an example of how i believe it works not my circumstances.

Yes I have taken the 3k allowance and yes I have other income too. Its going to be a 28k sacrifice but in my situation I wont save on CGT as I cant drop below living wage when sacrificing which is annoying but i will save child benefit being repaid, cheaper dividend tax and only 20% interest on savings. Plus save the tax and NI on sacrificed money and will grow in my investment.

My biggest headache is trying to guess my bonus in March!

markharriers

Thank You!

DRS1

My biggest headache is trying to guess my bonus in March!

Getting a bonus in March can be tricky - especially as you may miss any cut off date for doing a salary sacrifice adjustment to your pension contributions for this tax year. Would your employer allow you to do a bonus sacrifice?

Just so you know although salary sacrifice is more NI efficient than relief at source contributions you can use relief at source contributions (eg to a separate SIPP) to get yourself below NMW if that is what you want to do.

markharriers

https://forums.moneysavingexpert.com/discussion/comment/82092223#Comment_82092223

That's a question i am going to ask the company.

I was looking into if I could add money to my sipp to bring down my annual income but currently getting conflicting information do you think I can?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82092516#Comment_82092516

The contribution to the SIPP will raise your higher rate band. So if it is normally £50270 and you contribute (gross £20k) then it goes up to £70270.

The reason for that is you get the basic rate relief inside the SIPP. so you make a net contribution of £16k and then the SIPP gets £4k tax relief to get a gross contribution of £20k.

Technically you have not "reduced" your income in the same way as with salary sacrifice but you have reduced the amount of the income subject to higher rate tax.

Oh and if your contribution gets your wage down to zero then it doesn't matter that some of the wage would have been covered by the personal allowance and so taxed at 0% you still get 20% relief in the SIPP.

markharriers

https://forums.moneysavingexpert.com/discussion/comment/82092819#Comment_82092819

Yeah thats the bit I have been trying to get my head around. So it would still be a tool to keep me in the 20% tax bracket? Using your example if my goss income was say £69k I would still be considered a 20% tax payer because its raised my allowance to £70,270? Therefore everytime i contribute to the sipp it raises the £50270 allowance?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82092968#Comment_82092968

Yes That is right.

I do not know how you do your taxes but you do need to claim the higher rate relief. One way is if you do a self assessment but if you don't there is an online form. see here

Claim tax relief on your private pension payments - GOV.UK

PS remember not to try claiming for any contributions made via salary sacrifice. That is a question which gets raised from time to time.

markharriers

https://forums.moneysavingexpert.com/discussion/comment/82092980#Comment_82092980

That's Great thank you for your help! I have to submit a tax return for other things anyway so I would do it that way! Moving forward I'm tempted to see in March what the bonus amount is and if its enough to push me back into the 40% bracket I will put the bit im over into my sipp

hallmark

https://forums.moneysavingexpert.com/discussion/comment/82085254#Comment_82085254

sorry could you expand on that last point? I hadn't realised gilts were a reducing pool and there aren't many to buy I just assumed you could always buy a given issue?

wmb194

https://forums.moneysavingexpert.com/discussion/comment/82094458#Comment_82094458

You can but DRS1 wrote, "…the low coupon conventional gilts are a reducing pool…" In the current higher interest rate environment new gilts are being issued with coupons of 4%+. It's the low coupon gilts issued post Financial Crisis - those most beneficial to higher rate taxpayers as they trade below par and capital gains on gilts are tax free - that are slowly running off.