[Closed] 40% tax considerations

As long as you're on PAYE and pension stuff comes out of your salary via company then don;t think there's any need for a tax return.

If you do AVC's outside of payroll then you can claim some additional tax relief.

Phone your tax office for confirmation though.

Are you PAYE through your work or contracting/self employed?

If you are PAYE your work should sort out the rest for you. It's pretty much like being on the 20% tax bracket but you hand over more money to the system.

shove it all through the cayman subsidiary account

anyone who pays more than 10% in total deserves to be poor

Or in Take That

yeah just PAYE

Hi you won't need to fill out a tax return if you are paid by PAYE, unless you are a company director or earn alot more than just breaking into the 40% bracket.

You could put more into AVC but it won't take you out of the higher tax bracket.

As has been said, as an employee you will be taxed via PAYE so that lovely payrise wont seem like quite the burden..., I doubt anyone like the bank will be much interested in you unless you have a wedge of cash to give them and they can "wisely invest" for you. Going over to 40% unless by a large amount is rarely as good as it seems. in fact if i were you i'd have tried some kind on enhance pension provision and not had the liability.

If you are PAYE, the tax return would only be relevant if you're also earning outside of your job.

'You could put more into AVC but it won't take you out of the higher tax bracket. '

yes you could! and it doesnt need to be avcs, just pensions.

@titusrider, my understanding is you will probably get sent a tax return, in which case you need to fill it in. This is because the tax man will want to make sure things like interest income you may receive is properly taxed.

Personally I think ISAs are a bit of waste time, certainly at the moment when interest rates are close to zero. Why lock you're money up for longer for such a tiny tax benefit.

I do think you should look at your pension arrangements, the full tax relief of 40% is worth having.

Also if you give money to charity make sure it's gift aided as a higher rat tax payer, the charity can get the extra.

I can tell you of a few stories where people put savings/assets in their GFs/wives/kids name for tax reasons only to find they basically ran off with the money. Again, IMO it's not worth the risk for the small absolute savings.

If you're in a company pension scheme, you need to check how that's working. I've been looking at the way ours is set up, and we only get 20% tax relief, so people paying 40% tax need to fill out a self-assessment form to get the rest of the tax relief even if they are on straight PAYE and don't have any other income. Talk to your HR/Payroll dept...

If you are PAYE, the tax return would only be relevant if you're also earning outside of your job.

Not necessarily. If you are in the 40% tax bracket you really should fill in a return as there will be additional tax to pay on savings interest (although at current interest rates that will be about 50p/year for most people!) as well as additional reliefs on things like pension contributions if they are paid from your net salary. Other things like bike to work and share avings schemes become more lucrative too.

I guess its also worth making 100% sure my savings are in ISA's or my Gf's name right?

That really depends on how much you trust your GF as once the money is in her name, it is hers.

Edit: on the charity thing, I think that they can only claim the 20% and it is up to you to claim the remainder. Whether you then choose to keep that money or give it to the charity is up to you.

worst. willy. wave. ever.

Personally I think ISAs are a bit of waste time, certainly at the moment when interest rates are close to zero. Why lock you're money up for longer for such a tiny tax benefit.

An ISA doesn't necessarily lock your money away for longer - there are plenty that give you instant access.

The thing about ISAs is that there's an annual limit to what you can put in (£5,460 per year for a Cash ISA), so it makes sense to build up what you've got in an ISA, if you can, and then if/when rates go up you'll have a reasonable amount enjoying tax free interest. If you need to withdraw the money in the meantime then you don't really lose anything, you just have to start again building up what's in the ISA.

'You could put more into AVC but it won't take you out of the higher tax bracket. '

yes you could! and it doesnt need to be avcs, just pensions

Bit of a senior moment here:) Of course you are right. Just that it depends on how far you are into the 40% bracket, you might not be able to put enough into your pension etc....Plus unless you get other benefits outside your pay it probably isn't worth it.

I like the Cayman islands suggestion, though you could copy Jimmy Carr and go through an account in the Channel Islands....

Option to get a bit of biking in there as well

did someone say cayman, now theres an idea :
[img] [/img]

😛

40% makes the bike to work scam a bit more advantageous also, the bank will deduct standard rate tax from interest on your savings so you need to declare anything above that on a tax return or put your savings in an ISA, my wife "works in the home" so our meagre savings are in her name.

FWIW I stick all mine in the best performing ISA I can.

Not doing so as has been pointed out, can lead to the Tax man wanting extra from the interest you earn from other sources.

Nest way to think about it is that once your in the 40% bracket, any "extra" money you earn from any source which isn't tax free, is subject to 40% tax deduction as well.

ISA's and Premium Bonds (if you accept youo mightn't win) are your friend.

Or just do what I do and don't have any savings.

I was recently told that self assessment only becomes a requirement once your expenses go over about £2.5k. I can't vouch for the validity of that statement though.

You should give everything above the 40% band back to the government to help with the financial crisis. It is only [i]fair[/i].

I was recently told that self assessment only becomes a requirement once your expenses go over about £2.5k. I can't vouch for the validity of that statement though.

I can.

Marvellous, it wasn't nonsense then!

Maybe, but I got put on SA after spending a few months arguing with them about my expenses.

They collared me with self assessment a couple of years after slipping into 40%. Then after a few years of them giving me a fair wedge back because of higher pension contributions they switched me to a single sheet assessment. Then they stopped that and gave me an XL tax code.

Oh, and I have very little in the way of "expenses".

OP should also consider salary sacrifice for childcare vouchers and SIP share purchase if either apply.

edit: arguing with the tax office is a sure-fire way of becoming self-assessed!

I was recently told that self assessment only becomes a requirement once your expenses go over about £2.5k. I can't vouch for the validity of that statement though.

I can.

I can't and I'm claiming multiples of that. Or do you need to be over £2.5k and paying 40%?

"edit: arguing with the tax office is a sure-fire way of becoming self-assessed!"

Oh yes - i got told that in no uncertain terms on the phone to them yesterday. They split up my tax free allowance between 2 jobs (i havnt worked for the university for at least 4 years now) and thus over taxed me

They also had my wrong address on file - someplace i havnt lived for 3 years and i got a bunch of inland revenue letters forwarded for the last year to my new address last week.

Or do you need to be over £2.5k and paying 40%?

Yes.

Investing in an ISA has nothing to do with being in a 40% tax bracket. The money you invest in an ISA has already been taxed at source (if you are PAYE) but the interest that investment receives (which is paltry) is not taxed.

As said above there's nothing you need to do moving into 40% on PAYE. Bike scheme is just about worth doing and any O/T you do gets raped

OP should also consider salary sacrifice for childcare vouchers

Unless you are already in a scheme there is now no more benefit between 20,40 or 50% tax payers.

Unless you are already in a scheme there is now no more benefit between 20,40 or 50% tax payers.

The individual vouchers still have a lower net cost for 40, 60, and 50% tax payers, but they have reduced the amount of vouchers you can buy in an attempt to (roughly) equalise the total savings in a year. Worth bearing in mind that your kid doesn't have to be in child care in order to start buying them - as long as you have at least one child you can start buying the vouchers.

As for the question of whether you need to fill in a tax return, HMRC website is often a good source for such questions:

[url] http://www.hmrc.gov.uk/sa/need-tax-return.htm#1 [/url]

I'm in that bracket and have never needed to file a return, ISA is in my wife's name - but that was just because she's more organised than me.