Higher rate tax band - things to be aware of?

[NotAGolf]

I'm due to start a new job soon which will push me into the higher rate tax band.

There's a few things I've stumbled across recently that I didn't know previously, so was wondering if anyone else had any advice regarding tips, or anything else to be aware of? The things I recently learned are:

- I will likely need to complete a self assessment tax form to claim for the additional 20% tax relief on my pension contributions (a salary sacrifice scheme is not available)

- I need to opt out of child benefit, as the amount I will earn is above the threshold

- I no longer qualify for marriage allowance

In case it makes a difference. I'm full time employed and will pay via PAYE.

 

[Liquid_Entity]

I sit between the 50 to 60k and wife still claims child benefit. I just pay half it back in the following years tax. Once I hit ove r60k she's stopping it.

 

[Freefaller]

Very good call on the child benefits, I forgot to when I changed roles to a higher tax bracket (middle one 40% not the 45% one), and I got stung with a £2.5k bill as a result.

I'm not 100% sure if you need to do a SA for the pension contributions - but I guess best to check. You can try and reduce your salary I guess for higher pension contribution?

If you're earning under 100k you can still get 30 free hours for your kids if they're over 3 years old I believe.

 

[keyser van someone]

Some companies offer tax breaks if you purchase (or lease maybe) a car through work, they take the payment before they calculate tax and you end up paying less tax.

 

[Hades]

Yes you will be asked to complete a self assessment each year. So make sure you keep records of salary, benefits, profits from shares, bank interest, etc.

For self assessment make sure you complete it by 31st Dec so any further tax can be taken by tax code. If you wait until the deadline of 31st Jan you may need to pay it as a lump sum.

 

[Hades]

Some companies offer tax breaks if you purchase (or lease maybe) a car through work, they take the payment before they calculate tax and you end up paying less tax.

Isn't that a taxable benefit that must be declared when doing the self assessment?

 

[paradigm]

Not always a great idea to opt out of the child benefits, if your other half isn’t working.

I continue to claim and subsequently pay back the benefit as this keeps my wife “earning” according to PAYE as such is still building her state pension pot.

 

[Freefaller]

Not always a great idea to opt out of the child benefits, if your other half isn’t working.

I continue to claim and subsequently pay back the benefit as this keeps my wife “earning” according to PAYE as such is still building her state pension pot.

You can get stung if one of you earns over a certain amount (can't remember the figure), but it happened to me and had a massive HMRC bill which was worth more than the child benefits we go in the first place! I guess it depends on the OP's situation.

 

[LabR@t]

What's the threshold for it £45k £50k?

 

[LabR@t]

Can I increase pension contributions to stay under the threshold?

 

[Sui]

What's the threshold for it £45k £50k?

£50,270. Any money you earn over that (up until 150k) you will pay 40% tax on.

 

[paradigm]

£50,270. Any money you earn over that (up until 150k) you will pay 45% tax on.

Anything over £50,270 you pay 40% on (higher rate). Above £150k is 45% (additional rate).

 

[Sui]

Anything over £50,270 you pay 40% on (higher rate). Above £150k is 45% (additional rate).

Whoops, yes, I did mean 40%!

 

[CapitalOne]

Yes you will be asked to complete a self assessment each year. So make sure you keep records of salary, benefits, profits from shares, bank interest, etc.

For self assessment make sure you complete it by 31st Dec so any further tax can be taken by tax code. If you wait until the deadline of 31st Jan you may need to pay it as a lump sum.

On the Self Assesment question, if you are just PAYE (and don't have anything currently that requires Self Assesment) you should only trigger this if you earn >100k, not just because you are a higher rate taxpayer.

Just to add you can only (IIRC) put up to £3000 owed on your tax code.

Best, Capital One, previous Tax Code K586, glad to be back on 0T

 

[Hades]

Anything over £50,270 you pay 40% on (higher rate). Above £150k is 45% (additional rate).

There is also the gradual loss of the tax free personal allowance at £100k, significantly increasing the effective rate of tax stealthily.

 

[hans gruber]

One point about child benefit is it also gives you national insurance/state pension qualifying years. I claim it in case I don't pay myself enough salary one year, despite having to pay it back due to my wife's earnings.

 

[CapitalOne]

There is also the gradual loss of the tax free personal allowance at £100k, significantly increasing the effective rate of tax stealthily.

Yes, it hits 0 at 120k

 

[Maccapacca]

There is also the gradual loss of the tax free personal allowance at £100k, significantly increasing the effective rate of tax stealthily.

If someone offered you a £30k payrise from 95k to 125k you’d think it’d change your life. It’s like £50 a day take home. Ridiculous.

I need to also look at wfh benefit as well this year both me and the missus have been at home for the past two years.

 

[CapitalOne]

If someone offered you a £30k payrise from 95k to 125k you’d think it’d change your life. It’s like £50 a day take home. Ridiculous.

I need to also look at wfh benefit as well this year both me and the missus have been at home for the past two years.

Lobbing it into a pre-tax pension makes a lot of sense (obv. there is a limit and not all companies offer this)

 

[Hades]

If someone offered you a £30k payrise from 95k to 125k you’d think it’d change your life. It’s like £50 a day take home. Ridiculous.

I need to also look at wfh benefit as well this year both me and the missus have been at home for the past two years.

If you have the option then pump a much of it as possible into additional pension payments which are tax free.