Beat the System: The Tax Hack You Need to Know

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#taxrelief #pensionplanning #ukpersonalfinance #howtoget60%taxrelief
**Just a note, at 2.12 it should say EXCLUDING NI, not including. My apologies.
In this video as part of a new series '5 Minute Finance' I go over how it IS possible to get 60% tax relief for high earners.
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7 CRITICAL PENSION MISTAKES - AVOID THESE TO RETIRE EARLY
• 7 CRITICAL pension mis...
PROPERTY OR PENSION? A CHOICE AS SAFE AS HOUSES?
• Property or Pension - ...
BACKGROUND
Adjusted net income
www.gov.uk/guidance/adjusted-...
Losing your personal allowance
www.gov.uk/income-tax-rates/i...
*Thought the 6% assumptions at the end were perhaps a bit high net of charges and inflation but not enough to warrant filming again. Clearly assumptive only. World equities from 1970-2019 have been 5.5% real returns (Dimson, Marsh and Staunton) so 6% is definitely on the high side net of charges. You could also argue the 'effect of the tax relief' was actually only the difference between tax relief so the compounded figure should have been closer to £86,634.82.
The details provided in this video were from a current understanding of UK Tax Law. TAX LEGISLATION CAN CHANGE WITHOUT WARNING AND THOSE CHANGES CAN BE RETROSPECTIVE. Please ensure you seek advice before making any financial decisions.
A BORING BUT IMPORTANT DISCLAIMER:
This channel provides information on general financial planning. It is for educational purposes only and does not constitute financial advice. Unless you take regulated financial advice only YOU are responsible for your own decisions therefore we cannot be responsible for any action or inaction you take. Please take advice specific to you before making any decisions. Principles Personal Finance is an educational channel and is not affiliated with my employer. As such views are stated are individual and should be seen as such.
Investment involves risks. The investment return and principal value of an investment may fluctuate so that an investor's portfolio, when redeemed, may be worth more or less than its original value. Past performance is no guarantee of future results. The information provided in this presentation has been compiled from sources believed to be reliable and current, but accuracy should be placed in the context of the underlying assumptions.
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There are some scams on RU-vid where a profile image is copied then used to promote cryptocurrency scams and all that nonsense. I will never, ever, contact you selling any investment product or service. I would never do that, am not allowed by regulation and it goes against the intention of this channel is to educate and inform.

Опубликовано:

1 ноя 2021

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Комментарии : 32

@simonnewman4240 Год назад

This video was literally made for me Thank you!

@PrinciplesPersonalFinance Год назад

You're welcome Simon, thanks for watching!

@user-fr8hx4pn6g Месяц назад

Well explained easy to consume info thanks your sir

@TobyNewbatt 2 года назад

Super useful thanks mate!

@PrinciplesPersonalFinance 2 года назад

Cheers Toby, appreciate you watching! See your channel is growing nicely. Excellent work! 👍

@Pirake123 Месяц назад

Quick question, how come the pension contribution isn't £20,112? you should get basic tax relief when you make the contribution

@PrinciplesPersonalFinance Месяц назад

Hi, yes that is correct it's a relief at the source scheme. At 2:40 I mention the pension contribution 'including tax relief.' How tax relief is applied will depend on the scheme. Thanks for watching.

@stuartdunc100 2 года назад

Love the new series George.

@PrinciplesPersonalFinance 2 года назад

Thanks Stuart. Cheers for watching! 👍

@thomaschilds8781 Год назад

In a similar mechanic, do you know the effective tax rate over the child benefit taper (£50-60K)?

@johncolclough625 Месяц назад

1 more question do u have a video on company loan backs, on commercial terms, 50% of sipp and needs a charge, be good understand this, if it is a simple loan agreement thanks in advance

@evilzzzability Год назад

The 100k-125k tax band is one of the most egregious penalties fostered upon British workers, and it doesn't get the column inches it deserves as it's not a headline rate. Frankly I refuse to pay even 40% tax, never mind 60%. You are literally more of a slave to the man rather than a free agent if most of your marginal income goes to tax. And that the band hasn't moved for a decade as wages and inflation bring more and more people into it is also theft by stealth.

@PrinciplesPersonalFinance Год назад

I'm inclined to agree that that 60% rate doesn't make a lot of sense.

@johncolclough625 Месяц назад

would also that 25k to put in a pension also gain a 20% tax pay back from the government at 20% so would that increase the pension by extra 6250 - so this person say put in 25k , pension then shows £31250k, so in reality the actual tax paid and gone is 32460 - 6250 gain = £26210 im still learning this so be good if i got my understanding on this correct

@reabo 5 дней назад

Could you do a video for people with a side hustle? So you are paye (40% tax bracket) and make like 5k in side hustle. How can i put 5k into my pension without a tax bill or at least reduced

@PrinciplesPersonalFinance 5 дней назад

Thanks for the suggestion, I'll bear that in mind.

@reabo 5 дней назад

@@PrinciplesPersonalFinance do you know where I can get information on this?

@stropores5262 9 месяцев назад

Thanks for the video! 2:21 If I sum the take home pay (£76,242) and the total tax (£42,516) in the 1st example, I won't get the taxable income frome the slide - £125,140. Why is that?

@PrinciplesPersonalFinance 9 месяцев назад

Thanks for pointing this out and taking the time to comment, it should say total tax (excluding national insurance) which is where the discrepancy is coming from as for some reason I have stated including NI. I'll add a note in the comments. Appreciate you watching and taking the time to comment. I didn't see that in the edit! 🤦‍♂️

@stropores5262 9 месяцев назад

@PrinciplesPersonalFinance now it's clear. Thanks! One more question if you don't mind. If I'm in the higher rate tax band, does it mean that I can claim back 40% in my tax return? I'm asking since I found controversial positions on that. Somewhere, like here, it seems like I can claim back 40% (that makes 60% win eventually, which is awesome, totally agree), but somewhere (even on uncontested gov.uk!) it is stated that I can claim back only 20%. Where is the truth? Maybe there is some trick explaining both statements?

@PrinciplesPersonalFinance 9 месяцев назад

@@stropores5262 so the 20% is the amount added by the scheme for relief at source schemes. If you have a relief at source scheme then you'll need to claim back the 20% additional if you are a 40% taxpayer (20% given at source and 20% additional claimed back.) The 60% relief is a byproduct of the reinstatement of an individual's personal allowance when the pension contribution reduces 'adjusted net income' below £100k. Sorry for the technical waffle 🙃there but beyond the video that's the best way to describe it. Not all schemes are relief at the source so I'd suggest having a read of the below and double-checking how your tax relief is applied.👍 Wish you the best with this. www.litrg.org.uk/tax-guides/tax-basics/do-i-have-join-pension-scheme/do-you-know-how-tax-relief-your-pension

@stropores5262 9 месяцев назад

@PrinciplesPersonalFinance thank you very much indeed! I've attentively read this article. Did I get it right that right after I make a pension contribution which should reinstate my personal allowance in-year, my employer should make less deductions from my following income in the same tax year? And this is how I indirectly get the last 20% from 60% you mentioned. Or mechanics is a bit different? Couldn't find a clear explanation for this in detail, unfortunately. As far as I know, I can't carry forward my personal allowance for the next tax year.

@peterjones8335 4 месяца назад

I am in this marginal rate, I know, nice problem to have. However, this stifles investment as I am loath to make more money from investing as the tax paid on it will be 60%. I could put funds into my pension to offset it but I don't have those funds. If you make £5k in the band between £100k and £125k then you have to put £5k into your pension to offset it. On a £10k pay rise in that band (say, £100k to £110k) you will only receive £3,800 due to 60% tax and 2% NI. It is madness but most people do not know that they are paying it which is why it is rarely discussed. It is also not a headline rate like 40% and 45% so never makes the news. Make no mistake though, between £100k and £125k you are paying 60% tax plus 2% NI. If you earn £125k, maybe go down to four days on £100k as you are paying 60% tax on the Friday (5th day).

@fatblokescanfly 7 месяцев назад

Love it

@PrinciplesPersonalFinance 7 месяцев назад

Thanks, glad it was useful

@florianbehrend3331 Год назад

If i earn 119.472,66 and I am not paying pension with salary sacrifice - I will have to transfer a sum to my pension provider. This sum will be a net sum as i have already paid tax on it. I am struggling though how much that sum exactly should be to be a gross of 19.472,72 to take my income to 100k?

@PrinciplesPersonalFinance Год назад

Hi, sorry for being somewhat vague here but I have to walk a tricky line on being helpful but not straying into giving advice (joys of regulation.) When making a pension contribution, the most common ways of receiving tax relief are: 1) Salary sacrifice (pretty simple, you agree to sacrifice part of your salary and your employer pays in, is good for National Insurance savings, but you mention this is not included) 2) Net pay - the pension contribution is deducted from income before tax 3) Relief at source. The contribution is paid to a pension scheme and then grossed up by basic rate tax. You then reclaim any additional (20% for higher rate tax and 25% additional) via self-assessment or from HMRC. More typical for personal pensions and SIPPs. If someone wanted to put £10,000 into a pension via relief at source they would pay in £8,000, get tax relief via the provider. Then reclaim the other amount as mentioned. So it all boils down to knowing how the pension provider applies tax relief and making a contribution in line with that. If in doubt, always get advice specific to you. Thanks for watching and happy planning! 🙌

@florianbehrend3331 Год назад

So always 4/5 of the excess? Then with the tax return we claim back the 20% higher tax rate and then will not get taxed on losing personal allowance, correct?

@PrinciplesPersonalFinance Год назад

@@florianbehrend3331 Hi Florian, I didn't want to not respond to this but I'm very sorry but I can't answer that question. It would definitely get me in trouble with the regulator. It would be seen as specific advice to one person. Hope you understand but unlike a lot of people of RU-vid giving education content on finances. I'm a regulated individual and while I try to help as much as I can for general financial planning guidance. I can't overstep that line.

@florianbehrend3331 Год назад

@@PrinciplesPersonalFinance I thought so, no problem. I have taken personal numbers out of this example: Am I right that with relief at source I would need to pay 4/5 of the excess of 100k to my private pension provider (like in your example 8k with 10k excess), to put my gross effectively back to 100k?

@peterjones8335 4 месяца назад