Avoiding marginal tax rate and tax free child care

[Ynox]

Hi all,

I'm in the fortunate position that my income for the year is just over 100k. This unfortunately means I'm falling into the effective 60% tax bracket, and also we lose access to tax free child care.

Can anyone provide any thoughts on my plan?

Currently my gross income is £105k. This needs to be £99,999 to avoid this, so I was thinking I'll take out a SIPP and make a payment into it of £4000.80 (£5001 divided by 1.25). My understanding is that this would then give me an adjusted income of £99,999.

Another option is to max out salary sacrifices, but I figured this might be the quickest / easiest right now.

[bogie]

Yep, just pay into a SIPP, or salary sacrifice into a SIPP is even better to save the NI as well

[deja.vu]

bogie said:

Yep, just pay into a SIPP, or salary sacrifice into a SIPP is even better to save the NI as well

Are you sure the former is correct?

[MrSmith901]

If your work pension is salary sacrifice, can't you just up the % you put in to take it below 100K?

Or if part of your £105k is bonus, could you just put the part or all of the bonus straight into your pension?

[Kirkmoly]

Paying into a SIPP from net salary will not reduce your taxable income.

[Ynox]

Thanks all. Unfortunately increasing salary sacrifice pension contribs right now isn't an option (although I might for the next tax year). What bonus

If a SIPP won't work (I've read mixed messages on this, some places say it will - it's as clear as mud), I can make an additional (net) contribution to my workplace scheme. Would this work?

Starting to think a few quid with an IFA to sort this out might not be the worst idea.

[deja.vu]

It won't work.
You've already received the income and paid tax before you can put it in the SIPP

[Dave350]

Ynox said:

Thanks all. Unfortunately increasing salary sacrifice pension contribs right now isn't an option (although I might for the next tax year). What bonus

If a SIPP won't work (I've read mixed messages on this, some places say it will - it's as clear as mud), I can make an additional (net) contribution to my workplace scheme. Would this work?

Starting to think a few quid with an IFA to sort this out might not be the worst idea.

You've said increasing salary sacrifice pension contributions isn't an option right now, assuming this is as you change it annually at your work?

Most work places allow you to arrange for a one off payment to your pension or bonus sacrifice into pension which would reduce your taxable income. I'd contact your payroll and ask if you're able to make an increased one off contribution.

[Dave350]

Also, you've said your gross income is just over £100k. How much do you currently contribute into your workplace pension? e.g.

Gross Income - £105,000
Pension Contribution - (£4,000)
Private medical BIK - £1,000
Taxable Income - £103,000

Contribution to pension required - £3,001.

[Mr Pointy]

Ynox said:

Thanks all. Unfortunately increasing salary sacrifice pension contribs right now isn't an option (although I might for the next tax year). What bonus

If a SIPP won't work (I've read mixed messages on this, some places say it will - it's as clear as mud), I can make an additional (net) contribution to my workplace scheme. Would this work?

Starting to think a few quid with an IFA to sort this out might not be the worst idea.

Post your question in the IM sticky & you'll get an accurate answer:
https://www.pistonheads.com/gassing/topic.asp?h=0&...

[bogie]

deja.vu said:

Are you sure the former is correct?

my bad, thinking about paying less tax not dodging the childcare limits.

Paying into a SIPP from net pay wont work, you would get a tax rebate and uplift on what you pay in, but gross earnings would still show as £105k

Only way to to it is via salary sacrifice, into a workplace scheme or SIPP. Then the gross earnings on pay slip shown is less.

Still another 2 months before the end of the tax year.

[CorradoTDI]

Can you buy extra holiday etc?