When would you go over 100k vs keep it below

[Racehorse]

In view of the 60% tax you pay if you earn a gross above 100k is it always worth sticking to salary sacrifice into pension to keep below 100k.

Are there any situations where you would simply ignore the extra tax burden?

[financialbloke]

depends if you are also entitled to child benefit if earnings stay below £100k.

[Cupid-stunt]

Doesn't HAVE to be pension - but that is prob the best as it recirulates the money to you.

To answer he question, I can't think of any reason to remain >100k if you have the ability to go under.
Tax rates even higher in Scotland - so more incentive to stay below!

[UpTheIron]

Racehorse said:

Are there any situations where you would simply ignore the extra tax burden?

Some pretty obvious ones:
- you need the income to pay the bills.
- you've already maxed out your pension allowance
- your future is already financially secure so you'd rather spend the money now
- you really want that new toy, to hell with the maths
- even after maxing out your pension you'll still be over £100k
- ignorance is bliss

[Racehorse]

Cupid-stunt said:

Doesn't HAVE to be pension - but that is prob the best as it recirulates the money to you.

To answer he question, I can't think of any reason to remain >100k if you have the ability to go under.
Tax rates even higher in Scotland - so more incentive to stay below!

Bar pension what else can you do salary sacrifice for?

[okgo]

Racehorse said:

Bar pension what else can you do salary sacrifice for?

EV car schemes
Cycle to work schemes
Charity contributions

The list from uptheiron makes good sense.

[Racehorse]

Health cover/dental cover is taxable benefit right? How can you salary sacrifice

[Panamax]

Until recently it was worth some people alternating their income between £99,999 one year and £149,999 the next, spreading the 60% "hit" across two years.

Now that 45% tax effectively starts at £100k the additional 15% on £25k only (!!) costs £3,750. To put that into context the total income tax payable on £150k is now around £58,700

How much faffing about it's worth doing to suppress tax is always a personal decision.

As an aside, this tax illustration rams home the stark fact that any "working person" making a good salary in UK is paying for multiple additional households as well as their own.

[Cats_pyjamas]

okgo said:

EV car schemes
Cycle to work schemes
Charity contributions

The list from uptheiron makes good sense.

+ Company share schemes
+ Leave purchase

[markh1973]

Racehorse said:

Health cover/dental cover is taxable benefit right? How can you salary sacrifice

The health insurance I get as part of my package is a taxable benefit. Then I can salary sacrifice other health care options - those are not taxable benefits as I am paying for them.

I never reduced my salary to below 100k as I needed the extra income plus would have had to make maintenance payments based on my salary pre pension.

[Zigster]

markh1973 said:

The health insurance I get as part of my package is a taxable benefit. Then I can salary sacrifice other health care options - those are not taxable benefits as I am paying for them.

I never reduced my salary to below 100k as I needed the extra income plus would have had to make maintenance payments based on my salary pre pension.

If you give up (sacrifice) salary for a benefit, that benefit usually has a taxable value broadly equal to the amount of salary given up. Notable exceptions are pensions, cycle to work and (mostly) EV leases.

What health care options are you getting that don’t count as a taxable benefit?

[markh1973]

Zigster said:

markh1973 said:

The health insurance I get as part of my package is a taxable benefit. Then I can salary sacrifice other health care options - those are not taxable benefits as I am paying for them.

I never reduced my salary to below 100k as I needed the extra income plus would have had to make maintenance payments based on my salary pre pension.

If you give up (sacrifice) salary for a benefit, that benefit usually has a taxable value broadly equal to the amount of salary given up. Notable exceptions are pensions, cycle to work and (mostly) EV leases.

What health care options are you getting that don’t count as a taxable benefit?

If that were the case then there would be no benefit to salary sacrifice. The whole point of salary sacrifice is that I am reducing my salary in exchange for something. As long as I am paying the full value for what I am getting then there is no taxable benefit.

https://www.thetimes.com/money-mentor/income-budge...

[Alex Z]

Depends on how far above £100k you are likely to earn, and what you need the money for, surely.

If you might reach £150k, and want to maximise funds right now then take the hit and pay the tax.

[PlywoodPascal]

Panamax said:

Now that 45% tax effectively starts at £100k the additional 15% on £25k only (!!) costs £3,750. To put that into context the total income tax payable on £150k is now around £58,700

except in Scotland, where it starts at 75k.

[E63eeeeee...]

Panamax said:

Until recently it was worth some people alternating their income between £99,999 one year and £149,999 the next, spreading the 60% "hit" across two years.

Now that 45% tax effectively starts at £100k the additional 15% on £25k only (!!) costs £3,750. To put that into context the total income tax payable on £150k is now around £58,700

How much faffing about it's worth doing to suppress tax is always a personal decision.

As an aside, this tax illustration rams home the stark fact that any "working person" making a good salary in UK is paying for multiple additional households as well as their own.

That last paragraph sounds like utter nonsense to me. I'd imagine most people would be more surprised by how little their taxes actually pay for. In your scenario of the £150k salary, for example, they've paid for a senior nurse. That's it. And £150k is way beyond "a good salary" when the median is about £35k.

[Panamax]

E63eeeeee... said:

That last paragraph sounds like utter nonsense to me. I'd imagine most people would be more surprised by how little their taxes actually pay for. In your scenario of the £150k salary, for example, they've paid for a senior nurse. That's it.

Who do you think is paying for all the people on benefits and the tens of thousands of people arriving on small boats every year? It sure as hell isn't the taxes paid by one senior nurse or any number of senior nurses. UK is crippled by a large and growing number of "hangers on" supported by a relatively small number of significant taxpayers.

[E63eeeeee...]

Panamax said:

E63eeeeee... said:

That last paragraph sounds like utter nonsense to me. I'd imagine most people would be more surprised by how little their taxes actually pay for. In your scenario of the £150k salary, for example, they've paid for a senior nurse. That's it.

Who do you think is paying for all the people on benefits and the tens of thousands of people arriving on small boats every year? It sure as hell isn't the taxes paid by one senior nurse or any number of senior nurses. UK is crippled by a large and growing number of "hangers on" supported by a relatively small number of significant taxpayers.

I don't need to think, I can look this stuff up. The point is that even people on excellent salaries, four times the norm, aren't making that much of a individual contribution to the functioning of the UK. It's the numbers of taxpayers that are important. We've contrived a situation where too many working people have so little left after living costs they can't afford to pay meaningful amounts of tax.

Processing the asylum claims from people arriving on small boats is a much cheaper way of getting workers than paying for their education and healthcare for 18+ years. It is interesting how many people have been conned into thinking immigration is somehow to blame for the UK's financial situation, even though even the Tory clusterfk wasn't really that expensive in the grand theme of things.

The UK isn't "crippled", that's just hyperbolic nonsense. Most of the change in the ratio between working and non-working people is because of poor health and an aging population, perhaps by hangers-on you mean pensioners, but when people have worked for decades in one of the richest countries in the world it's not unreasonable for them to expect a reasonably comfortable retirement.

Anyway, your senior nurse is probably having a more positive effect on the UK's economy by enabling more people to work than most of the people making £150k.

[Zigster]

markh1973 said:

Zigster said:

markh1973 said:

The health insurance I get as part of my package is a taxable benefit. Then I can salary sacrifice other health care options - those are not taxable benefits as I am paying for them.

I never reduced my salary to below 100k as I needed the extra income plus would have had to make maintenance payments based on my salary pre pension.

If you give up (sacrifice) salary for a benefit, that benefit usually has a taxable value broadly equal to the amount of salary given up. Notable exceptions are pensions, cycle to work and (mostly) EV leases.

What health care options are you getting that don’t count as a taxable benefit?

If that were the case then there would be no benefit to salary sacrifice. The whole point of salary sacrifice is that I am reducing my salary in exchange for something. As long as I am paying the full value for what I am getting then there is no taxable benefit.

https://www.thetimes.com/money-mentor/income-budge...

There aren’t usually direct tax benefits from salary sacrifice, other than for the ones I mentioned. There might be some NI savings on a few things, or perhaps some groups discounts (e.g. I buy annual travel insurance as salary sacrifice - it’s still a benefit but there is a convenience aspect to it and a group discount).

I could be misunderstanding your point, but it comes across as you not understanding how income is taxed. I get a P11D each year (my employer is a bit retro like that) which includes the taxable value of my Tesla, BUPA, annual travel insurance and a couple of other things.

[markh1973]

Zigster said:

markh1973 said:

Zigster said:

markh1973 said:

The health insurance I get as part of my package is a taxable benefit. Then I can salary sacrifice other health care options - those are not taxable benefits as I am paying for them.

I never reduced my salary to below 100k as I needed the extra income plus would have had to make maintenance payments based on my salary pre pension.

If you give up (sacrifice) salary for a benefit, that benefit usually has a taxable value broadly equal to the amount of salary given up. Notable exceptions are pensions, cycle to work and (mostly) EV leases.

What health care options are you getting that don’t count as a taxable benefit?

If that were the case then there would be no benefit to salary sacrifice. The whole point of salary sacrifice is that I am reducing my salary in exchange for something. As long as I am paying the full value for what I am getting then there is no taxable benefit.

https://www.thetimes.com/money-mentor/income-budge...

There aren’t usually direct tax benefits from salary sacrifice, other than for the ones I mentioned. There might be some NI savings on a few things, or perhaps some groups discounts (e.g. I buy annual travel insurance as salary sacrifice - it’s still a benefit but there is a convenience aspect to it and a group discount).

I could be misunderstanding your point, but it comes across as you not understanding how income is taxed. I get a P11D each year (my employer is a bit retro like that) which includes the taxable value of my Tesla, BUPA, annual travel insurance and a couple of other things.

A direct quote from the link above

"Salary sacrifice is a workplace scheme where you give up some of your earnings each month in return for a non-cash benefit. This deduction reduces your salary and, because your income is lower, you pay less income tax and national insurance."

[Panamax]

markh1973 said:

"Salary sacrifice is a workplace scheme where you give up some of your earnings each month in return for a non-cash benefit. This deduction reduces your salary and, because your income is lower, you pay less income tax and national insurance."

Yes, that's the way it works today, although possibly one of the "tax loopholes" that Rachel Reeves will tackle in tomorrow's budget. With the tax bands repotedly being frozen through to 2028 more and more people are going to find themselves facing the "60% effective rate" above £100k and keen to reduce their taxable earnings through pension contributions, salary sacrifice etc.