60 percent effective tax rate
Discussion
New account as don't want my salary linked to my main account and posted all over the internet 
Due to a change of jobs this year which came with a nice salary bump and sign on bonus, I've found myself in the 60% effective tax rate bracket.
Unfortunately whilst the salary is better, the pension is pretty basic.
I'm planning on shifting some of the savings I've built up this year into a SIPP to reduce my taxable income to below £100k - thus clawing back the personal allowance and becoming 'just' a higher rate tax payer.
My question is twofold:
(1) I'm anticipating earning £117k this year. How much do I need to transfer to a SIPP to bring my taxable income below £100k? I'm getting confused here because I'm paying the money into a SIPP after paying tax on it.
(2) Do I need to complete a self assessment to claim back the additional tax relief on the pension contributions? How do HMRC typically return the tax already paid via PAYE?! Can I do this immediately after the tax year ends (e.g. mid April).
Appreciate any advice or experience offered.
In case it matters - the £117k reflects sign on bonus, plus earnings from job 1 and 2 AFTER pre-existing pension contributions (I think referred to as taken at source?!)
Due to a change of jobs this year which came with a nice salary bump and sign on bonus, I've found myself in the 60% effective tax rate bracket.
Unfortunately whilst the salary is better, the pension is pretty basic.
I'm planning on shifting some of the savings I've built up this year into a SIPP to reduce my taxable income to below £100k - thus clawing back the personal allowance and becoming 'just' a higher rate tax payer.
My question is twofold:
(1) I'm anticipating earning £117k this year. How much do I need to transfer to a SIPP to bring my taxable income below £100k? I'm getting confused here because I'm paying the money into a SIPP after paying tax on it.
(2) Do I need to complete a self assessment to claim back the additional tax relief on the pension contributions? How do HMRC typically return the tax already paid via PAYE?! Can I do this immediately after the tax year ends (e.g. mid April).
Appreciate any advice or experience offered.
In case it matters - the £117k reflects sign on bonus, plus earnings from job 1 and 2 AFTER pre-existing pension contributions (I think referred to as taken at source?!)
Edited by elegantpuzzle on Tuesday 17th January 23:57
elegantpuzzle said:
Rufus Stone said:
1) £13,600
2) Yes. Cheque/bacs. Yes.
Thanks for taking the time to reply.2) Yes. Cheque/bacs. Yes.
How would I calculate the additional refund I’d get back from HMRC directly?
Jonathan27 said:
On the point of the Self Assessment, everyone earning over £100k is supposed to complete a self assessment. Assuming that your PAYE job is your only source of income, its a pretty straightforward online job. Takes about two minutes, and saves you getting a HMRC fine.
No one tells you this though, and if you're only PAYE its shouldn't be unexpected that a person should just assume the large amount taken out at source everything month should be taking care of it. Like the OP I have just landed in this trap, salary alone it wouldn't be too much of an issue, but there is likely to be a pretty hefty bonus this year. I also then get whacked with losing half of the free childcare on offer too. So its starts to look like a sieve pretty fast and what should have been a celebration of landing the 6 figure role is now leaving me all a bit bitter, which I have to shake. I also fully accept this is full on cry me a river territory, but the 65% tax trap is a joke frankly, I wouldn't object if 45% started at £100k, but 65% can get in the bin.
A further bit of advice is that when you enter the pension contribution figure to your self assessment tax calculation you should use the gross amount of contribution. You then get the additional 20% refund calculated on the right amount. So, in OP’s example you enter pension contribution of £17,000. Actually, he also says there is a small amount through payroll so it will be £17,000 plus the grossed up payroll contribution. In the tax year you change employment there will be two such amounts to add in, one from old employer payroll deduction and one from new employer deduction.
Brisvegas 997C2S said:
Jonathan27 said:
On the point of the Self Assessment, everyone earning over £100k is supposed to complete a self assessment. Assuming that your PAYE job is your only source of income, its a pretty straightforward online job. Takes about two minutes, and saves you getting a HMRC fine.
No one tells you this though, and if you're only PAYE its shouldn't be unexpected that a person should just assume the large amount taken out at source everything month should be taking care of it. Like the OP I have just landed in this trap, salary alone it wouldn't be too much of an issue, but there is likely to be a pretty hefty bonus this year. I also then get whacked with losing half of the free childcare on offer too. So its starts to look like a sieve pretty fast and what should have been a celebration of landing the 6 figure role is now leaving me all a bit bitter, which I have to shake. I also fully accept this is full on cry me a river territory, but the 65% tax trap is a joke frankly, I wouldn't object if 45% started at £100k, but 65% can get in the bin.
Jonathan27 said:
On the point of the Self Assessment, everyone earning over £100k is supposed to complete a self assessment. Assuming that your PAYE job is your only source of income, its a pretty straightforward online job. Takes about two minutes, and saves you getting a HMRC fine.
Why aren't we told this? It wouldn't even occur to me that it'd be something I needed to check as I'm PAYE - thanks for the heads-up. Is it done through the gov.uk tax portal?AyBee said:
Why do Brits just hate sharing what they earn? In Sweden, you can look up what anyone earns.
its programmed into us from an early working age so that employers don't have to pay everyone in the same role the same amount and they can get away with paying as little as possibleJealousy can also be a problem, I know where i work there are people with the mindset "why is X getting more than me, f
k them" Jonathan27 said:
On the point of the Self Assessment, everyone earning over £100k is supposed to complete a self assessment. Assuming that your PAYE job is your only source of income, its a pretty straightforward online job. Takes about two minutes, and saves you getting a HMRC fine.
Not the situation at all. PAYE, in theory, be able to calculate a person's tax liability correctly. HOWEVER, it doesn't always. If that is the case, then there is an argument that the best way to sort the situation is to register for Self Assessment. It is not compulsory though.In 2026 the plan is for Self Assessment to be discontinued so that option may not be available in future. My expectation thopugh is that Self Assessment will not disappear as the new digital system HMRC wants to introduce is proving a lot more difficult to implement than they originally thought.
duckson said:
Wololo said:
Can you share the 13,600 calc please?
I'm in a similar situation and would like to understand.
20% of £17k is £3400, 17k minus £3400 is £13.6k. I'm in a similar situation and would like to understand.
bmwmike said:
duckson said:
Wololo said:
Can you share the 13,600 calc please?
I'm in a similar situation and would like to understand.
20% of £17k is £3400, 17k minus £3400 is £13.6k. I'm in a similar situation and would like to understand.
bmwmike said:
duckson said:
Wololo said:
Can you share the 13,600 calc please?
I'm in a similar situation and would like to understand.
20% of £17k is £3400, 17k minus £3400 is £13.6k. I'm in a similar situation and would like to understand.
theboss said:
It has no bearing on the tax calculation. His taxable income ends up being £117k minus £17k gross pension contribution thus he's taxed on income of £100k. If the adjusted income ended up at £105k then the allowance would be removed proportionately for that extra £5k
Thanks. Makes sense.Gassing Station | Finance | Top of Page | What's New | My Stuff