Tax help

Diagro

Diagro

Diagro

Soldato
Joined
3 Jun 2012
Posts
11,086
Yo peeps

Quick one.

Is it possible to tell an employer to pay ANYTHING above the 50k tax threshold into the already set up Pension plan?
In doing so, reducing the amount of Tax that is paid on the pay above the tax threshold and also as its "pre tax" i'm hoping my student loan payments also wont inflate further to reflect the actual wage... however, I'm not ofay with how the student loan payments are calculated.

I don't see the point in being paid money over the threshold, for only 55% of it to vanish. Especially if I can put that elsewhere and keep 90-100% of it for the future.

Ta
 
Last edited:
I rewrote the above as it was pretty poorly written. I actually fell asleep 4-5 times when writing it. THAT's how boring Tax is to me lol
 
I'm not sure a payroll department will want to agree an 'anything over' arrangement, particularly if your pay is variable to any extent (overtime, variable shifts, bonus, commission etc.) but it should be relatively simple for you to work out the extent of your pay that is typically subject to this tax band and set up a fixed amount additional pension contribution.
 
Kenai said:
I'm not sure a payroll department will want to agree an 'anything over' arrangement, particularly if your pay is variable to any extent (overtime, variable shifts, bonus, commission etc.) but it should be relatively simple for you to work out the extent of your pay that is typically subject to this tax band and set up a fixed amount additional pension contribution.
Click to expand...
Yeah, i agree.

OP should be able to use an online tax calculator with trial an error to estimate how much they could put into a pensiom pot to not jump a tax band.
 
Doesn't take much working out for an estimate. 40% bracket is a shade over 50k. If you earn 55k you'd need to lose 5k so 9% pension contribution (5 divided by 55). 60k you'd need to lose 10k so 10/60 is around 17% contribution.
 
Last edited:
DB_SamX said:
Yeah, i agree.

OP should be able to use an online tax calculator with trial an error to estimate how much they could put into a pensiom pot to not jump a tax band.
Click to expand...

ListenToTaxman - UK Tax Calculator and Salary Calculator PAYE Income Taxes 2023 - 2024

listentotaxman.com listentotaxman.com

This one is nice in that it shows you how much tax you're paying in each band once any special tax codes, loan repayments etc. are accounted for, so you can more quickly assess how much extra money you want to divert into your pension.
 
Student loans come after tax. If you're repayment plan 1 you're paying low interest anyways.

You'll have to do some man maths - take gross, subtract from 50, divide by months to end of tax year (its only April remember). Your online HMRC account will tell you taxable pay to date, get an account setup and ready. Remember, any expected interest from bank accounts needs to be added to your gross (so even tho it's tax free, it may put you into the higher band lol).

Tell payroll to take that amount divided by 12.

In December recalculate to see if you need to adjust.

In March recalculate and see if you need to adjust. You can do an after tax payment into your pension worst case and claim the tax back.
 
Last edited:
dlockers said:
Student loans come after tax. If you're repayment plan 1 you're paying low interest anyways.

You'll have to do some man maths - take gross, subtract from 50, divide by months to end of tax year (its only April remember). Your online HMRC account will tell you taxable pay to date, get an account setup and ready. Remember, any expected interest from bank accounts needs to be added to your gross (so even tho it's tax free, it may put you into the higher band lol).

Tell payroll to take that amount divided by 12.

In December recalculate to see if you need to adjust.

In March recalculate and see if you need to adjust. You can do an after tax payment into your pension worst case and claim the tax back.
Click to expand...
I'm in Repayment plan 1, 2 and postgraduate loan, my payments are approx £350-£380 per month.
 
Diagro said:
I'm in Repayment plan 1, 2 and postgraduate loan, my payments are approx £350-£380 per month.
Click to expand...
Oof. You need a proper spreadsheet then. Yes you'll get ding on tax over 50k but if it helps get the student loan plan 2 stuff dinged quicker it may be worth it? Unless it's just growing at a phenomenal rate and no realistic chance of clearing it.
 
I have it setup so mine does this but involves a fair bit of maths and it all depends on the company, HR team and the pension plan.
I've currently got it setup as a percentage of my gross, I need to call HR to see if I set it up as a fixed amount, If I would still get my NI tax allowance.

There is a limit to how much pension can be paid into a scheme per year and of course you can setup your own pension/sipp and claim the tax back.
 
Do your current pension contributions come out pre-tax (salary sacrifice) or "relief at source" (after tax, and then the pension provider gets the government to add 20% of your contributions)?

Salary sacrifice makes things a lot easier to do the "under £50,271" calculations.

My pension contributions are relief at source. I can still get tax relief by contributing more to my pension (after tax), but I have to claim the extra 20% tax relief via self-assessment.

My pension provider requires all employees within the company to switch to salary sacrifice — it would make things easier for me, but not sure I could convince everyone else to switch.
 
Last edited:
If you have a salary sacrifice pension your work should have a process for 'additional voluntary contributions' or similar.
They probably won't have a setup to automate it like yoy want so you may have to do it manually (request payment chunks each month for jan/feb/march).

Definitely worth doing. Also saves on child benefit clawback that happens over £50k so even more marginal saving - You don't see another one until £100k+
 
dlockers said:
Oof. You need a proper spreadsheet then. Yes you'll get ding on tax over 50k but if it helps get the student loan plan 2 stuff dinged quicker it may be worth it? Unless it's just growing at a phenomenal rate and no realistic chance of clearing it.
Click to expand...
My total student loan is north of 50k.
It's going to be a LONG time before it's clear.
Heh
 
Diagro said:
Is it possible to tell an employer to pay ANYTHING above the 50k tax threshold into the already set up Pension plan?
Click to expand...

Yes if your company uses a salary sacrifice system, you can basically make your salary anything you want (under your actual salary)

As long as you remain above minimum wage on paper and do not exceed the maximum allowable contribution (I think this is £40K)

Avoid at all cost the child tax credit claw back (if you have kids) to avoid a marginal tax rate of 70-100% depending on number of children. £50-£60K

They may not agree to this exact request, but I have asked my payroll team to sacrifice additional bulk amounts over a period of them for example.

Other options include signing up to an EV salary sacrifice scheme that has the same impact, although less easy to vary.
 
Last edited:
What bugs me, is that I have to self declare to HMRC that I earn over 50k... which they already know. So that they can force me to pay a £900 lump sum in tax... to repair tax credits.. which they knew I'd have to... and could have spread it across the year...

But that would be logical. And HMRC is anything but Logical.

Might just have a word with finance in January and have them sacrifice 1.1k per month of my jan-april wages into my pension.
Bringing me down to just over 50k, hah no self assessment and £900 in repayments to be made.
Let's see if that's possible.
 
Last edited:
Diagro said:
What bugs me, is that I have to self declare to HMRC that I earn over 50k... which they already know. So that they can force me to pay a £900 lump sum in tax... which they knew I'd have to... and could have spread it across the year...

But that would be logical. And HMRC is anything but Logical.
Click to expand...
You don't have to tell them anything, just anticipate the bill when they catch up.
 
dlockers said:
You don't have to tell them anything, just anticipate the bill when they catch up.
Click to expand...
Hmm, giving me time to put aside a little into my spare account for when they do? Hmmm. Options.
To be honest, much rather sacrifice the pay and utilise it when the kids have flew the nest haha
 
Diagro said:
Hmm, giving me time to put aside a little into my spare account for when they do? Hmmm. Options.
To be honest, much rather sacrifice the pay and utilise it when the kids have flew the nest haha
Click to expand...
Yep! I generally declare "under", and then earn interest on the cash until they ask for it back.
 
You must log in or register to reply here.
Back
Top Bottom