Any accountants on here - mine is on holiday?

[interstellar]

Quick one if anyone can help?

Its a first world problem but I would rather get it right.

I am an employee and earn over 100k but dont take it all to avoid the 60% tapered personal allowance thingy so I put most of the money into my pension if its over 100k , including my annual bonus I got in Feb.

We are just doing March payroll and I have been given a payrise so I am now going to end up on £105,525 for this tax year so am going to give up some basic salary to get it down but dont want give it all up.

Am I right in thinking I dont need to get it to 100k exactly if I have allowable expenses to claim. I thought my accountant told me in previous years because I claim tax relief on business mileage and working from home etc I only need to get it to about 103k in my circumstances.

Is that true or have I completely got that wrong and If I dont want to fall into the 60% trap I need to give £5225 up?

Can anyone give me a steer? I need to know my Monday ideally.

[Mr Overheads]

Surely if you are giving up £5k of salary then you are losing 100% of it. Take the £5k and pay 60% tax on it. Unless you need to be under for Childcare Allowance?

[MaxFromage]

That's correct, your business expenses will reduce your gross income for tax purposes and therefore result in less personal allowance being lost.

[interstellar]

Mr Overheads said:

Surely if you are giving up £5k of salary then you are losing 100% of it. Take the £5k and pay 60% tax on it. Unless you need to be under for Childcare Allowance?

I am not losing it I am putting 5k in my pension rather than 2k in my pocket.

[Eric Mc]

Accountant on holiday?

Absolutely disgraceful.

Obviously a slacker.

[interstellar]

MaxFromage said:

That's correct, your business expenses will reduce your gross income for tax purposes and therefore result in less personal allowance being lost.

So if it give up £2500 and get my total to about £103000 ish I wont be paying 60% if I have £3000 of allowable expenses?

I am trying to avoid paying 20% extra on this £5000 which I will just have to pay in tax in self assessment this year, it seems a waste of money to take it all.

[Burrow01]

Eric Mc said:

Accountant on holiday?

Absolutely disgraceful.

Obviously a slacker.

To be honest Eric, an accountant taking time off in March, just before the end of the tax year, is not a great look, as it must be one of the busiest times of the year.

[Eric Mc]

Not sure what you are trying to say - what does "if I gave up £2,500" mean?

[Eric Mc]

Burrow01 said:

To be honest Eric, an accountant taking time off in March, just before the end of the tax year, is not a great look, as it must be one of the busiest times of the year.

Not really. The worst time for most accountants is the run up to 31 January due to the Self Assessment tax return filing deadline.

Just before 31 March the main pressure might be clients wanting a bit of pre tax year end planning - or, if they are a limited company with a 31 March year end (of which there are quite a few) a bit of financial year end planning.

[Countdown]

interstellar said:

MaxFromage said:

That's correct, your business expenses will reduce your gross income for tax purposes and therefore result in less personal allowance being lost.

So if it give up £2500 and get my total to about £103000 ish I wont be paying 60% if I have £3000 of allowable expenses?

I am trying to avoid paying 20% extra on this £5000 which I will just have to pay in tax in self assessment this year, it seems a waste of money to take it all.

Are these expenses that you're having to pay for out of your own pocket? i.e. Your employer isnt reimbursing you for them.

[MaxFromage]

interstellar said:

So if it give up £2500 and get my total to about £103000 ish I wont be paying 60% if I have £3000 of allowable expenses?

I am trying to avoid paying 20% extra on this £5000 which I will just have to pay in tax in self assessment this year, it seems a waste of money to take it all.

Correct.

[MaxFromage]

Bear in mind the rules for working from home changed in 22/23:

https://www.icaew.com/insights/tax-news/2023/jan-2...

[interstellar]

Eric Mc said:

Not sure what you are trying to say - what does "if I gave up £2,500" mean?

Sorry I wasnt clear. I mean push that to my pension as in (give it up now) and avoid paying tax on it now but not taking it in my take home pay.

[interstellar]

Countdown said:

Are these expenses that you're having to pay for out of your own pocket? i.e. Your employer isnt reimbursing you for them.

No these are mianly business miles I can claim relief on.

[interstellar]

MaxFromage said:

Correct.

Ok thanks, I thought as much. I'll do a £2500 contribition to my pension. Its not an exact science as it depends on what my expenses relief will be but its better having £2500 in my pension than £1000 in my pocket now. For me it is anyway.

[Eric Mc]

Be careful with the "working from home" tax relief rules for employees. In most cases, employees can only make this claim if it is a condition of their employment that they must work from home from time to time.

If an employee is given an option as to whether they can work from home or not, if they do exercise that option, they are not eligible for working from home tax relief.

[interstellar]

Eric Mc said:

Be careful with the "working from home" tax relief rules for employees. In most cases, employees can only make this claim if it is a condition of their employment that they must work from home from time to time.

If an employee is given an option as to whether they can work from home or not, if they do exercise that option, they are not eligible for working from home tax relief.

Makes sense. I dont do my self assessment so this is done right with my accountant. My contract says I am homebased and HMRC have requested a copy in the past to ensure I am based here.

[Eric Mc]

Sounds like all is in order, provided the terms of the contract are adhered to (the downfall of some IR35 cases).