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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Given the reduction in my tax allowance over £100k

Resolved Question:

Given the reduction in my tax allowance for earnings over £100k it almost seems not worth earning that money...is there something I can do to make ease this effect? Its compounded by the CSA using my gross salary to calculate my child maintenance as well. By my calculations I lose 40% of every pound over in tax, then 20% because every £2 reduces my allowance by £1, then 19% for CSA, then 13% NI - a total of 92%!!! is this correct?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi.

Take a look here for information on what is taken into account to determine your net adjusted income for the purpose of determining your eligibility for the personal allowance.

The only ways an employee can reduce their income and so increase the amount of personal allowance they qualify for is to pay pension contributions and/or gift aid donations.

You don't get tax relief for child support payments I'm afraid so you will be paying a high effective rate of tax once you take those payments into account. NIC is charged at 9% on earnings between £7,956 and £41,865 and at 2% on the excess of earnings over £41,865.

I'm sorry I cannot offer you any better news. Let me know if you have any further questions.
Customer: replied 1 year ago.

Hi Tony... can you confirm whether benefits in kind also add to the income they use to calculate the £100k threshold or is it just earnings? I have £9k of car and health benefits?

Also am I right in thinking that if i put £1 in my employee final salary pension I get £1 plus value from it whereas if I leave it in my salary I only get 19p (£1 less 40% tax + 20% lost allowance +2% NI +19% CSA = 81%) ...would the net loss to my salary just be 19p in every £1??

Expert:  TonyTax replied 1 year ago.
Benefits in kind are included as is any other taxable income such as bank interest, dividends etc.

Assuming you earn under £150,000, you will get 40% tax relief on your pension contributions so each £100 contribution will save you £40 in tax, the net cost being £60 for £100 of value in your pension.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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