Those who are in the 40% tax bracket - Corsa Sport - for Vauxhall and Opel Corsa B, Corsa C and Corsa D

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Ste

Premium Member

Registered: 5th Mar 03
Location: Taif, Saudi Arabia
User status: Offline

31st May 12 at 19:57

What do you do to minimise the cash you pay in 40% tax?

I've increased my company share incentive plan to the maximum of £125 a month, which the company matches. These are locked into the scheme for 5 years, after which they can be withdrawn tax & NI free.

What else do you do?

I would rather lose by a mile because i built my own car, than win by an inch because someone else built it for me.

Tim

Site Administrator

Registered: 21st Apr 00
User status: Offline

31st May 12 at 20:02

Not much you can do unless you can go self-employed and stay within IR35?

I do the same with shares, BUPA, childcare vouchers, etc. It's very limited what you can claim against - even dental insurance isn't claimable...

[Edited on 31-05-2012 by Tim]

Gaz

Member

Registered: 24th Aug 03
Location: Widnes, Cheshire
User status: Offline

31st May 12 at 20:08

£34,371 - £150,000 salary... I wish!

Tim

Site Administrator

Registered: 21st Apr 00
User status: Offline

31st May 12 at 20:10

To be fair this isn't really limited to the 40% tax bracket

Ben J

Member

Registered: 31st Jan 05
Location: Cheshire
User status: Offline

31st May 12 at 20:12

I can hear Portfolio's being opened.

RichR

Premium Member

Registered: 17th Oct 01
Location: Waterhouses, Staffordshire
User status: Offline

31st May 12 at 20:19

40% is above £42,500 isn't it not £34,371?

Gaz

Member

Registered: 24th Aug 03
Location: Widnes, Cheshire
User status: Offline

31st May 12 at 20:26

quote:
Originally posted by LiVe LeE
40% is above £42,500 isn't it not £34,371?

I went off http://www.tax-calculators.co.uk/incometaxbands.html but misread it as there is a line further down suggesting: "In 2012/2013, most will start paying 20% tax at £8105 and 40% tax at £42475"

Kyle T

Premium Member

Registered: 11th Sep 04
Location: Selby, North Yorkshire
User status: Offline

31st May 12 at 20:31

Meh our sharesave isn't pretax, but pension is... I should really get on board with the pension at some point.

Not much you can really do other than self employed I guess.

Lotus Elise 111R

Impreza WRX STi

cpcrampton

Member

Registered: 16th Feb 07
Location: Stirling
User status: Offline

31st May 12 at 21:12

The best possible thing to do, is put money into childcare vouchers if that is available to you, this is a tax free benifit. You can also increase the amount you pay into your pension even to the extent of dropping you out of the 40% bracket.

Or just take the hit. If you do not like it look into moving to a tax haven.

Ste

Premium Member

Registered: 5th Mar 03
Location: Taif, Saudi Arabia
User status: Offline

31st May 12 at 21:27

Don't need childcare vouchers and my pension is set.

I've been taking the hit for years and already pay over 10k a year in tax and NI.

All I want is to put my money to better use.

I would rather lose by a mile because i built my own car, than win by an inch because someone else built it for me.

cpcrampton

Member

Registered: 16th Feb 07
Location: Stirling
User status: Offline

31st May 12 at 21:30

oopps

[Edited on 31-05-2012 by cpcrampton]

cpcrampton

Member

Registered: 16th Feb 07
Location: Stirling
User status: Offline

31st May 12 at 21:39

OK here are the only ways you can avoid the 40% tax band legally:

Pay more into your pension

Any contributions you make into your pension are deducted from your salary before you are taxed. It reduces your taxable salary.

So if you earn £43,000 a year and contribute 5 per cent of this (£2,150) to your pension, then you taxable salary is just £40,898. This is safely below the higher rate tax limit.

But if your salary is £44,000 and you contribute 5 per cent of this (£2,200) to your pension, then your taxable salary is £41,800. As the higher rate will now cut in at £41,450, you’ll be paying 40 per cent tax on your top £350 of income.

You can avoid paying this by paying a little bit more into your pension, although this will leave you with less spending money each month.

Use your ISA allowance

Any interest you receive in normal accounts is taxable. So if you earn £41,000 a year and received £500 in interest before tax you would automatically become a higher rate tax payer.

You can avoid this by using your ISA allowance. The income on ISAs is tax free and does not need to be declared on tax self-assessment forms.

You can put £10,680 into ISAs this year (until April 4 2013) with up to half of it, £5,340, can go into a cash ISA. Find out more with This is Money's five favourite best buy cash Isas for 2013

Give money to charity

As a higher rate taxpayer, both you and the charity benefit from Gift aid donations. For every £100 you give, the charity receives £125 and you can claim £25 against your tax bill.

Childcare vouchers

Childcare vouchers made available through employers let parents save money on nursery and child-minding costs for offspring up to the age of 15. They are a completely legal way of sacrificing your salary.

The vouchers can be used to pay for all or part of the costs of a registered childcare provider and are worth around £1,000 a year for those starting today or around £2,900 for those who were already signed up before last April.

And finally ... set yourself up as a business

This option isn’t one for everyone. In fact, the costs of doing it would probably outweigh the benefits for those near the threshold. But we thought it was worth flagging in case your earnings suddenly took off and you're in an industry where it might work.

It involves setting yourself up as a director of your own limited company. You must them negotiate a contract, legally, with your employer where they will pay your salary to the ‘company’ incurring 20 per cent corporation tax.

You can then take income out of the company as dividends thereby avoiding income tax and national insurance - worth another 12 per cent up to that same threshold of around £42,000.

There are various other processes to complete but the outcome is that you will avoid paying the higher rate of tax. The downside is that when you want to access cash, typically after several years, you will need to wind up the company and take the money out.

This means that you must have savings to fall back on in terms of disposable income.

MarkM

Member

Registered: 11th Apr 01
Location: Liverpool
User status: Offline

31st May 12 at 22:46

I've got BUPA and other bits and bobs to bring it down.

Setting up myself as a company looks very appealing although it'd be an interesting conversation to negotiate a contract with my existing employers.

djgritt

Premium Member

Registered: 1st Nov 07
Location: Dorset Drives: Focus ST / Hyundai i20N
User status: Offline

31st May 12 at 22:48

I've not even considered trying to reduce my 40% taxable...

But I have increased my Pension contributions since the start of this financial year, so that might help for this year. But not as a way to minimise tax... Just as my Scheme has changed.

[Edited on 31-05-2012 by djgritt]

Member

Registered: 5th Jul 00
Location: Aberdeen City
User status: Offline

1st Jun 12 at 06:42

I hate paying tax

Ben J

Member

Registered: 31st Jan 05
Location: Cheshire
User status: Offline

1st Jun 12 at 07:06

End of the day, i'm happy that I earn £130k a year so am happy to take the hit on tax tbh.

Nath

Member

Registered: 3rd Apr 02
Location: MK
User status: Offline

1st Jun 12 at 07:29

quote:
Originally posted by Ben J
End of the day, i'm happy that I earn £130k a year so am happy to take the hit on tax tbh.

Alright James calm down.

All Torque

Member

Registered: 17th Nov 05
Location: Milton Keynes Drives: Ford Focus TDCi
User status: Offline

1st Jun 12 at 07:39

pow

Premium Member

Registered: 11th Sep 06
Location: Hazlemere, Buckinghamshire
User status: Offline

1st Jun 12 at 07:44

WILLY. WAVING.

Warren G

Member

Registered: 14th May 06
Location: Kent
User status: Offline

1st Jun 12 at 07:59

I barely make the 20% bracket

Whittie

Member

Registered: 11th Aug 06
Location: North Wales Drives: BMW, Corsa & Fiat
User status: Offline

1st Jun 12 at 08:12

quote:
Originally posted by Warren G
I barely make the 20% bracket

Good job there isn't a foreigner bracket

VrsTurbo

Premium Member

Registered: 8th Jun 10
User status: Offline

1st Jun 12 at 08:12

quote:
Originally posted by Warren G
I barely make the 20% bracket

A2H GO

Member

Registered: 14th Sep 04
Location: Stoke
User status: Offline

1st Jun 12 at 08:17

quote:
Originally posted by Whittie

quote:
Originally posted by Warren G
I barely make the 20% bracket

Good job there isn't a foreigner bracket

Gary

Premium Member

Registered: 22nd Nov 06
Location: West Yorkshire
User status: Offline

1st Jun 12 at 08:46

quote:
Originally posted by pow
WILLY. WAVING.

Hammer

Member

Registered: 11th Feb 04
User status: Offline

1st Jun 12 at 08:47

quote:
Originally posted by Ste
Don't need childcare vouchers and my pension is set.

I've been taking the hit for years and already pay over 10k a year in tax and NI.

All I want is to put my money to better use.

It's not yours, it's her majestys. Pay your taxes mate.

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