£100k + Tax Advice
Discussion
Hi all,
Posting for advice on how to approach breaking the £100k salary threshold.
In the current financial year, my total yearly pay will come to £115k. Having done some reading I know the £100-125k income bracket gets heavily taxed, therefore wanted to check on how best to approach it?
Breakdown: £80k Salary, £35k bonus. Pension: 6% contributed with my employer putting in 12%. No kids etc.
Any advice is appreciated!
Thanks!!
Posting for advice on how to approach breaking the £100k salary threshold.
In the current financial year, my total yearly pay will come to £115k. Having done some reading I know the £100-125k income bracket gets heavily taxed, therefore wanted to check on how best to approach it?
Breakdown: £80k Salary, £35k bonus. Pension: 6% contributed with my employer putting in 12%. No kids etc.
Any advice is appreciated!
Thanks!!
Can I piggy back on this subject, please?
I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
- State and occupational pensions: £85,000
- Savings: 700
- Dividends: 12,000
- BIK : 5300
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
The Leaper said:
Total: £103,000
Your tax allowance is going to get reduce by £1500 in this case. If this didn’t happen, you’d take home about £69543. With the reduction, you’ll take home about £68943, and paying roughly £600 more in tax. Personally, and I am also in this situation, I wouldn’t worry about £50 a month.
HSviper0995 said:
Hi all,
Posting for advice on how to approach breaking the £100k salary threshold.
In the current financial year, my total yearly pay will come to £115k. Having done some reading I know the £100-125k income bracket gets heavily taxed, therefore wanted to check on how best to approach it?
Breakdown: £80k Salary, £35k bonus. Pension: 6% contributed with my employer putting in 12%. No kids etc.
Any advice is appreciated!
Thanks!!
Pension all the way. Get payroll to do it in March for 15k if you can afford to not have 6k in your pocket right now. Posting for advice on how to approach breaking the £100k salary threshold.
In the current financial year, my total yearly pay will come to £115k. Having done some reading I know the £100-125k income bracket gets heavily taxed, therefore wanted to check on how best to approach it?
Breakdown: £80k Salary, £35k bonus. Pension: 6% contributed with my employer putting in 12%. No kids etc.
Any advice is appreciated!
Thanks!!
I’m the same. Just got a 31k bonus and put all in pension. I could do with it but I’d rather have 31k in my pension than 12k in my pocket.
I really don't think it's as simple as "Pension all the way".
A pension is taxed on the way out - currently that taxation is more favourable than it was (Lifetime allowance) but there is absolutely no guarantee that it will stay that way. The tax free lump sum is already capped at approx £260K. That sounds like alot, but in 20 or 30 years time it might not be. Also, in 20 or 30 years time, that cap may be reduced.
Your state pension, at current levels, uses most of your zero band tax allowance.
You might die before you can access your pension.
You might have good use for the money today.
A pension is taxed on the way out - currently that taxation is more favourable than it was (Lifetime allowance) but there is absolutely no guarantee that it will stay that way. The tax free lump sum is already capped at approx £260K. That sounds like alot, but in 20 or 30 years time it might not be. Also, in 20 or 30 years time, that cap may be reduced.
Your state pension, at current levels, uses most of your zero band tax allowance.
You might die before you can access your pension.
You might have good use for the money today.
Might be worth a look at the various VCT / EIS / KI EIS etc schemes available.
Yes involves “ investment “ money but in effect 30% income tax relief available on what is invested.
Shouldn’t invest just for the tax relief ie the investment needs to make sense / appeal.
Also other benefits with these schemes but also they all carry a degree of risk.
Yes involves “ investment “ money but in effect 30% income tax relief available on what is invested.
Shouldn’t invest just for the tax relief ie the investment needs to make sense / appeal.
Also other benefits with these schemes but also they all carry a degree of risk.
The Leaper said:
Can I piggy back on this subject, please?
I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
Presumably all pension income is from defined benefit schemes or annuities? If any was from a defined contribution scheme, i would just reduce the income you withdraw. I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
- State and occupational pensions: £85,000
- Savings: 700
- Dividends: 12,000
- BIK : 5300
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
Otherwise, you can (assuming you’re under 75) still pay into a pension scheme. Depending on your circumstances, it could be as little as £10k pa contribution allowance and, as someone else said, it is more of a deferral of the issue than anything else. However, that would avoid the 60% tax rate for now.
Assuming that doesn’t work for you, you might need more specialist tax advice
omniflow said:
I really don't think it's as simple as "Pension all the way".
A pension is taxed on the way out - currently that taxation is more favourable than it was (Lifetime allowance) but there is absolutely no guarantee that it will stay that way. The tax free lump sum is already capped at approx £260K. That sounds like alot, but in 20 or 30 years time it might not be. Also, in 20 or 30 years time, that cap may be reduced.
Your state pension, at current levels, uses most of your zero band tax allowance.
You might die before you can access your pension.
You might have good use for the money today.
I guess there’s a point where you just have to suck up the 60% tax rate from 100-125k and pay it, but anyone earning 100-130k would be mad not to whack it into their pension. £30k a year into a pension isn’t even that much if you want a decent pot. A pension is taxed on the way out - currently that taxation is more favourable than it was (Lifetime allowance) but there is absolutely no guarantee that it will stay that way. The tax free lump sum is already capped at approx £260K. That sounds like alot, but in 20 or 30 years time it might not be. Also, in 20 or 30 years time, that cap may be reduced.
Your state pension, at current levels, uses most of your zero band tax allowance.
You might die before you can access your pension.
You might have good use for the money today.
For me it’s a matter of principle, I think 60% is outrageous so there’s no way I’m letting the government have my money to squander. I’ll go part time before I pay that. I’m sure it’s been said many times before but they’d probably take more total tax if the rates were lower!
Zigster said:
The Leaper said:
Can I piggy back on this subject, please?
I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
Presumably all pension income is from defined benefit schemes or annuities? If any was from a defined contribution scheme, i would just reduce the income you withdraw. I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
- State and occupational pensions: £85,000
- Savings: 700
- Dividends: 12,000
- BIK : 5300
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
Otherwise, you can (assuming you’re under 75) still pay into a pension scheme. Depending on your circumstances, it could be as little as £10k pa contribution allowance and, as someone else said, it is more of a deferral of the issue than anything else. However, that would avoid the 60% tax rate for now.
Assuming that doesn’t work for you, you might need more specialist tax advice
All DB.
I'm over 75.
Actually, I don't think there's anything significant I can do. I could transfer some shares to the wife so she gets the dividends which will be liable to income tax at her rate, but I did something similar a few years but it was a faff, and the fee for the Medallion Guarantee was over £500!
R.
The Leaper said:
Can I piggy back on this subject, please?
I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
What's the BIK, and given the marginal tax rate is high on this, is there a more efficient way of structuring it?I am in a similar situation, ie , I have crept over the £100,000 threshold for income tax purposes. However, my circumstances and income are different to HSviper0995. In summary, it's a follows:
- State and occupational pensions: £85,000
- Savings: 700
- Dividends: 12,000
- BIK : 5300
The savings income comes from a FRB. I have other investments such as ISAs, the income from which is not taxable of course.
Been retired a long while and no way of using pension contributions to reduce tax liability.
I suspect that many PHers will say that this is a "nice " problem to have, but any advice will be welcome.
R.
MaxFromage said:
What's the BIK, and given the marginal tax rate is high on this, is there a more efficient way of structuring it?
The BIK is ex-employer paid PMI cover for me and the wife. We would not be persuaded to give up this protection; I'm prepared to pay the tax on this at my marginal rate,R.
You can get 4.5% on the TN25 gilt between now and Jan 25. That is CGT and income tax exempt - so depending what return you’re getting on your other investments that’s one way of restructuring things maybe?
All good problems to have, mind!
Charitable gifts maybe? You get less but maybe prefer choosing where your £ goes?
All good problems to have, mind!
Charitable gifts maybe? You get less but maybe prefer choosing where your £ goes?
Don’t see gifts to charity mentioned?
Worth putting a note that folks donating to church/charities etc can include that on their tax return & get relief there.
Anything you tick a gift aid box for including things like guide/scout annual subscriptions.
Don’t need to be cash donations either. In certain circumstances donating unwanted household items or clothes to charity shops, just searched for a link to British heart foundation to show how & was actually surprised to see the amount of giftaid they get on items
https://www.bhf.org.uk/how-you-can-help/donate/gif...
Worth putting a note that folks donating to church/charities etc can include that on their tax return & get relief there.
Anything you tick a gift aid box for including things like guide/scout annual subscriptions.
Don’t need to be cash donations either. In certain circumstances donating unwanted household items or clothes to charity shops, just searched for a link to British heart foundation to show how & was actually surprised to see the amount of giftaid they get on items
https://www.bhf.org.uk/how-you-can-help/donate/gif...
omniflow said:
You might die before you can access your pension.
That argument doesn't really fly. So what. We're talking about a DB pension. You will probably die before selling your house and blowing all the proceeds. If you die before you can access a DB pension, it will just go into your estate for your dependents. And it'll be ringfenced against IHT. So if you're going to die young, it's a good place to have your money. Thanks for the responses.
I do make charitable gifts each year, but the total amount is modest. One plus is that I get to decide where the money goes, rather than it going to HMRC, and the amount is fully tax deductible, of course. I may decide to increase my charitable gifting ....perhaps.
The dividends I get arise from my participation in my ex employer's ESPP when I was employed by them. CGT, and the now substantially reduced allowance for it, means that divesting these shares, even piecemeal, is a problem. Assuming the average share price I paid was $1 per share while participating in the ESPP, the current price is $9, so the capital gain is substantial. It will take beyond my lifetime to fully divest these shares. Best, I think, to hold the shares and let them pass to my beneficiaries when I die, so the liability for CGT is reset to zero, according to current legislation.
The fundamental problem for me is that I am retired and over 75 so the opportunity to make any changes that increase tax efficiency seem limited.
As I said earlier, "nice" problem!
R.
I do make charitable gifts each year, but the total amount is modest. One plus is that I get to decide where the money goes, rather than it going to HMRC, and the amount is fully tax deductible, of course. I may decide to increase my charitable gifting ....perhaps.
The dividends I get arise from my participation in my ex employer's ESPP when I was employed by them. CGT, and the now substantially reduced allowance for it, means that divesting these shares, even piecemeal, is a problem. Assuming the average share price I paid was $1 per share while participating in the ESPP, the current price is $9, so the capital gain is substantial. It will take beyond my lifetime to fully divest these shares. Best, I think, to hold the shares and let them pass to my beneficiaries when I die, so the liability for CGT is reset to zero, according to current legislation.
The fundamental problem for me is that I am retired and over 75 so the opportunity to make any changes that increase tax efficiency seem limited.
As I said earlier, "nice" problem!
R.
If you’re only a couple of grand into the band like the 103k example don’t worry about it. Anything else up to 125k put it in your pension or get a car or something else salary sacrifice as said. Once over 125k don’t worry about it so much. The hike in tax for that small band starts to feel less of a drag
I got a £12k bonus recently. I put almost all into pension except a bit as I thought it would be nice to have a treat.
However, due to it being relief at source the whole lot was taxed. Meant my monthly net pay was tiny and I had to rely on savings. So no treat for me. I should have realised this but I'm new to this level of earning and stupidly misunderstood my pension type.
I'm still unsure if I need to do self assessment to get it back. Some say I do but others say the pay just corrects itself so next month I'll get taxed less.
However, due to it being relief at source the whole lot was taxed. Meant my monthly net pay was tiny and I had to rely on savings. So no treat for me. I should have realised this but I'm new to this level of earning and stupidly misunderstood my pension type.
I'm still unsure if I need to do self assessment to get it back. Some say I do but others say the pay just corrects itself so next month I'll get taxed less.
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