You don't need to be an 'investor' to invest in Singletrack: 6 days left: 95% of target - Find out more
Hi all,
So I am lucky enough to be a higher rate tax payer but not by a massive amount.
My pension contributions are paid straight from my salary Gross, before any deductions.
So if I was to increase my pension contributions to say a whopping 33% & take out cycle to work, would I still be classified as a higher rate tax payer & therefore get higher rate tax benefits on both my pension & cycle to work ?
It would depend on your taxable income after pension deductions/salary sacrifice. Might mean you are below the threshold.
I am not an accountant.
I think you stop being a higher rate tax payer, IANAA.
https://listentotaxman.com/45000?yr=2019&add=-83.33&code=10500&pension=33%25
Thanks Jim, that's a really useful calculator.
& yes you are correct.
you're only a higher rate tax payer on the bit of money you pay over the rate.
lets say you earn 50k and the tax limit is 40k. (taking national insurance out for sake of ease) You are paying 40% tax on the last 10k - so £4k
if you salary sacrifice 10k into a pension/c2w (doesn't matter which) - you will effectively have the full relief on that - so you would lose £6k from your take home pay, but gain £10k in pension/bikes (note : pension may be taxed when you withdraw it, and you might pay BIK on the bike at the end of the year).
if you salary sacrifice 15k, you would get the full 40% relief on the first 10k, then only 20% relief on the last 5k - so you would lose £10k from your take home pay, and gain £15k in pension/bikes.
On average, the latter case is 'worse' - but you're not really losing anything from scenario 1 - its just that the additional benefit you're getting from scrificing even more is less. You are still getting the full benefit on the 10k, but only the 'reduced benefit' on the 5k. you are not getting a reduced benefit on the full 15k
5lab is correct.
I'm going through exactly the same process at present. Was just about to buy a bike off cyclescheme cos it's a huge saving
Then realised that since I'm paying an extra 600 pcm into my pension I am no longer a higher rate tax payer and so the saving isn't as big
So no new bike 🤔
Move to Scotland and get pumped for tax every which way but loose. 😛
Move to Scotland and get pumped for tax every which way but loose.
Just waiting for the tax you need to pay on your tax...