Higher rate tax band - things to be aware of?

Soldato
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It was in reply but a post snuck in. Should have quoted but you don’t need to worry about tax on bonus going over the 40% bracket as PAYE will pick it up.

He's talking about making additional pension contributions in order to get a tax break if the bonus takes him above the 40% threshold, and depending on how the pension contributions are deducted there is no guarantee that PAYE will pick up the tax rebate.
 
Soldato
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Well if she's not breaking the law then I have no issue with it.

I guess it can be seen as taking the ****, however I do my best to minimise what I pay in the countries where I have assets, why wouldn't she do that too?

I suppose it depends on perception from others which is what politics is all about.
When hubby is trying to become next PM, there is no excuse.
 
Soldato
OP
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Thanks for all the feedback all. Sorry I've not been able to keep on top of the replies.

I'm still a bit confused over whether or not I'll need to complete a self-assessment form; seems to be a bit of conflicting responses.

My salary will be 60k, plus a potential bonus, but it will be well under the 100k mark which brings with it some more questions/considerations. I don't know whether my pension will be paid via a net pay or relief at source scheme. I just know salary sacrifice won't be an option.


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.
Why do you need to keep track of bank interest?


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.
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.
My wife is working, but is only part time. She doesn't earn enough to pay tax, but I think she pays a smidge of NI from memory.


Earning between 50 and 60k is an enormous marginal tax rate. 40% PAYE, 3.25% NI, something like 11% child benefit claw back on the first child and another 7% on any additional kids, and potentially 9% student loan.

As a result, anything to reduce that is worth a think about. Pension contributions help. I'll be buying a bike on cyclescheme: effective cost is around £400 for a £1000 bike. Make sure to claim WFH allowance on your tax return.
I've claimed for WFH for the past couple of covid years, but I believe they've changed the rules now so you can't claim if you choose to work from home, or if they have an office you can realistically use. I will be working from home, and my contract says I will (at my request), but the office is only 45 mins away so I don't think I can argue that away!


Cycle to work
Massively increase your pension
Any pretax schemes at work?
Any opportunity for like company shares or anything?

Dump everything you can into any optional extras you can get to mitigate the tax

Suppose it depends how far into the tax band you are
As above, 60k, but I don't think there's any fancy offerings at work other than pension. I can crank up the contributions to some extent, but I can't go too crazy as I'm getting a new mortgage in the next year or two (hopefully), so need to be able to prove my affordability


Is the OP saying that their future employer has a net of tax scheme, where you pay into a pension after tax is deducted? Is that an allowable thing? What about contributions from employer.
As above, I'm not sure what pension contribution method they will be using. I just know it's not salary sacrifice. My employer will be contributing a few %, but I'm not sure if it's via a net pay or relief at source scheme.
 
Soldato
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It's taxable income. I can't recall whether the bank already deduct tax when paying it to you. But they certainly don't deduct tax at 40%.
Ahh yes, that rings a bell now. I remember ignoring it in the past as don't you get some kind of allowance (which I knew I'd never exceed), but I guess you need to declare everything.

Oof, at this rate I'm going to lose most of my pay rise; half lost due to the the child benefit, the other half to the accountant who's going to have to walk me through all this :cry:
 
Soldato
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Ahh yes, that rings a bell now. I remember ignoring it in the past as don't you get some kind of allowance (which I knew I'd never exceed), but I guess you need to declare everything.

Oof, at this rate I'm going to lose most of my pay rise; half lost due to the the child benefit, the other half to the accountant who's going to have to walk me through all this :cry:

Your bank already declares it to HMRC who adjust your tax code. If you are over the allowance. As they obviously can't do this without hindsight, they will adjust a future tax code depending on what you owe or are owed.

PAYE is there to make your life easier and is applicable for the vast majority of people and probably you.

https://www.gov.uk/apply-tax-free-interest-on-savings
https://www.gov.uk/guidance/bank-and-building-society-interest-returns#background

As this is the internet people will always point out how something doesn't work.
 
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Man of Honour
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Depends if you csre about ethics and morality.

I do. But if it's legal where's the moral issue?

That said I accept that she undoubtedly spends the majority of her time in the UK with her husband and kids so being non domiciled is probably not quite right. Not defending her but I can't say I care a huge amount about it.
 
Associate
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Cycle to work
Massively increase your pension
Any pretax schemes at work?
Any opportunity for like company shares or anything?

Dump everything you can into any optional extras you can get to mitigate the tax

Suppose it depends how far into the tax band you are

Some more ideas.

Buy 5 days extra holiday per year (lots of companies offer this) -2% salary
Opt-in to company car scheme (electric), and lose the car allowance
Gift aid receipts (including things like national trust) [and donations to your local school "PTA"]
Don't forget previous years pension allowance if you've not used it
Childcare vouchers (if you were signed up before changes)
 
Can't type for toffee
Don
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As above, 60k, but I don't think there's any fancy offerings at work other than pension. I can crank up the contributions to some extent, but I can't go too crazy as I'm getting a new mortgage in the next year or two (hopefully), so need to be able to prove my affordability

I've had mine set at 35%before when there was unlimited overtime on lol.

As for the C2W scheme, you don't NEED to get a bike, accessories and stuff are fine too.
Our C2W is halfords tho and they don't allow any form of electronics, had to goto an indie, bought a loada accessories and a Garmin Fenix for me cycling :)

Company share scheme?

healthcare plans?
Im on one that's about a tenner a month for me n the bairns (missus wasnt fussed about being on it this year)
Get all sorts of cash back should we use any health related things, me n the young un both wear glasses as we get 105 cashback each year for glasses/contacts.
That normally pays for my contacts for the year and he got 2 pairs of glasses for school n a pair of nice Rx sunnies last year :)

Aye the holiday one is a good shout but we got shafted this year, they gave everyone all of the extra BH leave in Feb, queue everyone trying to burn like /
days leave loads of eople left with leave means we had to carry a full week over, meaning we weren't allowed to buy.


Tax code? Marriage allowance?

I was told 51.5 was my barrier before moving upto the next bracket, checked with the DWP as I didn't wanna get told off haha.
They confirmed that by lumping all of the above onto my wages I was simply being tax efficient and its wouldnt be seen as tax avoidance


That'll do pig that'll do :D
 
Associate
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There is also the gradual loss of the tax free personal allowance at £100k, significantly increasing the effective rate of tax stealthily.
Oh ++++. Didn't know this.
So all the NI increases are getting me, but the allowance increases which I thought would off set...do naff all.
 
Soldato
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Nobody has mentioned one of the other ways to adjust your net income - the SEIS scheme (basically you're lending money to startups and small business, and the govt will give you tax relief on that). It's riskier than increasing your pension contributions but potentially interesting, thinking about it myself
 

Ev0

Ev0

Soldato
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Going back to the child benefit thing, you can sign up for it which gets all the things done to give NI credits or whatever else you get by registering, but you can check a box to say you don't want to be given the actual child benefit payments.

No big deal but just depends if you want to just not get the cash in the first place so you have nothing to pay/sort out after, or still take the money but have to sort out any tax liability afterwards.

Small pros and cons for each option I guess!
 
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You will likely end up on SA under £100k if your affairs are complicated, its easier for them to just switch the SA flag on than to try to get info needed from you, so
- large investment income
- large savings income
- complicated pensions deductions requested
- rental income
are the sorts of thing that will get them to switch you to SA

You can kind of defeat this if you send them ALL the information they require and request an amendment to your tax code. If its simple they will just do it for you.
If not, welcome to SA ;)
 
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