How To Save £1,000s in Tax Before 5th April (Spring Budget Changes)

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HMRC Adjusted Net Income Guide - www.gov.uk/guidance/adjusted-net-income
My Guide - james-shack.co.uk/adjustednetincomeguide
Financial Planning
I am a Partner in a financial planning practice based in the UK. If you would like to find out more about our services, please follow this link: go.novawm.com/getintouch
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00:00 Intro
02:04 Biggest Missed Opportunities
02:53 Pension Recap
04:27 No Income or Retired
06:51 £50k - £90k
09:59 Important Message For Everyone
10:31 £50k - £90k cont
12:02 £90k +
15:13 Where Everyone Gets It Wrong
16:12 Pension Vs ISA
17:23 Helping Family Members

Опубликовано:

10 мар 2024

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Комментарии : 502

@JamesShack 7 месяцев назад

I really hope this helps save you some tax - it took a long time to put this one together! I've started my Newsletter back up. In next weeks, I'll be sharing more tax year-end tips like this, so if you found this video useful, make sure to sign up here: james-shack.co.uk/newsletter

@markeh1971 7 месяцев назад

Hi, I came to this conclusion about SS through DC pension within my pay packet to put the money that I would be paying 40% tax on by just going over the threshold through not raising the limits each year, the “physical drag” as they call it. Now with retirement around the corner I can pay a bit into my DC pension. I’ll health is raising its head so may have to fully retire at 55 or before 60 and rely on this money to make it to state pension age. That assumes I live to spend it, if not the wife will get it, but not the tax man. Take care M.

@davidcooks2379 7 месяцев назад

You forgot to talk about the pension taper, which is 70% marginal tax rate. But I understand there is really nothing that can be done there

@keithgourlay5115 7 месяцев назад

@@davidcooks2379you’re lucky to have huge earnings to be caught by the taper lol

@notwothesame 7 месяцев назад

Phew! I can imagine it took a lot to put together. I had to rewind multiple times for each example to sink in! Apologies if this is a dumb question but how are the effective tax band percentages calculated, eg. 50-60k @ 60%. Is the effective tax due to a loss of child benefit (7 mins)? Feels odd that tax % is mixed with government benefit?

@chicadegalles 7 месяцев назад

Thank you James 😂

@rossnorthcote9164 7 месяцев назад

What's absolutely criminal is that these bands aren't moved every year in line with inflation.

@guyr7351 7 месяцев назад

All part of the plan to recover the billions that Covid and Ukraine conflict and the fuel support schemes have cost the Government. It has to be repaid somehow

@brookrichardson1373 7 месяцев назад

The tax man knows that people don't see these bands as moving down with typical wage increases and inflation each year.

@moderndroneman 7 месяцев назад

Politics. “Freezing tax bands” is the stealthiest way to increase tax. It even sounds like it could be a positive thing.

@MastererClark 7 месяцев назад

It’s called fiscal drag and it’s 100% a deliberate stealth tax

@Sythgara 7 месяцев назад

How long has it been since that "4 year freeze" of 12 500 allowance. At least I'm sure it was gonna be 4. In 2013/14 it was 10000, then next year I THINK it jumped to 11000? Then maybe 12000 and finally 12500, I've been waiting for a raise for 7 years? and the 12500 is still supposed to be frozen? I might not be completely right but I'm sure it's been YEARS

@JamesShack 7 месяцев назад

It's maddening to think of all the extra tax that has been paid and benefits that families have missed out on, just because no one explains this stuff to us!

@tobybarker6808 7 месяцев назад

they shouldnt have to be told...the system should be simple enough to just be fair to all. Stuff of fairytales, of course.

@alangordon3283 7 месяцев назад

It is done to us on purpose

@brightieboy9228 7 месяцев назад

The sad truth is that if EVERYONE was super tax efficient then the govs tax income would reduce, so they would end up putting up tax rates to increase income.

@dukmo4216 7 месяцев назад

How can one pay into pension of their spouse? Is that from taxed income? Or can it be done pre tax?

@JamesShack 7 месяцев назад

@@dukmo4216 This has to be a personal contribution.

@vincenzegreisingel2429 6 месяцев назад

One of the most lucid narrators on this sector on RU-vid. Very useful.

@JamesShack 6 месяцев назад

Thanks, I'm glad you find it useful!

@F00TY1988 7 месяцев назад

This is the best and most useful summary for these challenges I've found. Thanks so much for laying it all out so clearly along with the common issues! Calculating exactly where I'm going to fall and whether Ive done enough or not is so stressful!

@JamesShack 7 месяцев назад

You're very welcome!

@MPD90 7 месяцев назад

One thing you could do is just overshoot the mark comfortably (if financially able of course). So instead of aiming for 100k and risking falling the wrong side of the mark, aim for 95k and leave yourself ample wiggle room for anything unexpected. You would still be getting 40% (42% salary sacrifice) tax relief on the extra 5k, and extra money in the pension pot, plus the peace of mind.

@AndrewHepburn 7 месяцев назад

All of this is even more important in Scotland, where we pay 42% on income over £43k and 48% over £125k, and starting in April we'll pay 45% on income over £75k too

@martinyoung3049 7 месяцев назад

I was about to mention exactly the same thing. The marginal rates in Scotland are really severe, especially between £43.6k and £50.2k where you pay 42% Income tax + 8% NI (from April 2024) for a combined effective rate of 50%!

@sozilla 7 месяцев назад

Why are the rates higher in Scotland, and what benefits do you guys get from the increased hit?

@AndrewHepburn 7 месяцев назад

@@sozilla SNP anti-business politics, playing to their base. Very little additional tax is raised (as their own advisors warned them) because people - especially the better off - seek ways to avoid tax. It also adversely affects our Barnett funding. It's just really ignorant politics that actively harms Scottish people and Scottish public services.

@kw8757 7 месяцев назад

I'd say move to England but it'll be the same or worse here when Labour win the next GE... isn't socialism great?

@AndrewHepburn 7 месяцев назад

@@kw8757 Rachel Reeves has hinted that she would like to reduce taxes on higher earners. Hopefully a UK Labour govt would put pressure on a much diminished SNP (noting that the SNP's previous finance minister has also openly criticised their current tax policy)

@andycaine4117 7 месяцев назад

It’s nice hearing you talk about the 60% tax after 100k. No one seems to know or speak of this stealth tax window. It makes no sense and needs fixing

@JamesChurchill3 7 месяцев назад

Window? Sounds like something that needs extra taxation.

@bennyblanco1491 6 месяцев назад

@@JamesChurchill3 ffs let’s penalise those that have done well shall we?

@shambhangal438 7 месяцев назад

Exactly what my accountant advised - I will be over the 100K limit by about 20K, and was advised to stick that 20K into a pension. I'll actually put in 25-30k (as I am over 55 and can take some back out if I find myself income-poor for a year). This will mean that the final balancing tax bill for me will go from my owing the HMRC a few thousand to them owing me several thousand. That plus I'd much rather my earnings were paying for my retirement tomorrow rather than on interest for yesterday's COVID payout loans.

@lechprotean 7 месяцев назад

you think you're smart but HMRC are shafting you for tens of thousands anyway and you will see very little of that in return. Much better to move to a 10-19% tAX regime elsewhere in Europe if your work allows it. yOU WILL STILL PAY >30K IN TAX/ni

@Byfleetboy 7 месяцев назад

Watch out for MPAA which may be triggered if you draw down on your pension in a poor income year as this would restrict tax free pension contributions after that point.

@daeluxor5254 7 месяцев назад

Once you crystallise your pension, you can barely contribute anything to it after that. Don't draw from it without serious forethought

@MPD90 7 месяцев назад

As above, sounds like you misunderstand the ramifications of 'take some back out', worth looking into that as really you shouldn't touch it until you actually retire. Also if I were 55+ and earning £120k+, and on assumption you think your retirement won't be too far away, I'd be absolutely loading the max I can into pension. You're saving tons of tax and you'll have access to the pot soon anyway, seems a no brainer (of course if your expenses allow, but hopefully they do).

@guyr7351 7 месяцев назад

Are you not able to contribute pension for previous years if not used up full allowance. Anything to save tax is a no brainer

@acdstcks205 7 месяцев назад

It is madness that the amount you get tax free on childcare hasnt increased. It cost 21k full time nursery care and it's only 2k and remained the same for years.

@simapark 6 месяцев назад

Your wife should be looking after your kids not a bored teenager on her phone all day

@grahamheath9957 7 месяцев назад

Hi James, this is really helpful, what is think needs to be clear at the moment is that although today there is no pension lifetime allowance, it seems that it’s a labour policy to bring that back and it’s also the case that those people at or over that £100K earnings threshold are the ones most likely to be impacted with that if it does come back. So to some extent I think we need to be cautious about making the statement that pensions are almost always better as an investment as although that may be true today, it may not be so in the future, in particular if the lifetime allowance is finally lower than it was before. Of course it is speculation that the allowance would definitely come back, but i do think it’s something to keep a close watch on as it would significantly change the impact of tax on pensions.

@Umski 7 месяцев назад

I am planning to do the child benefit game come 24/25 - for 9 years and now 3 kids my wife has claimed zilch even though she hasn’t been working purely because I was in the annoying bracket just above £60k - I feel comfortable in increasing my pension contributions but hadn’t considered doing it as an ad-hoc payment at the end of the year which was making my head hurt so thanks ☺️ 👍

@stephencole9289 7 месяцев назад

Same here, or rather I would, except too late for me as my children are all older than 20 years old now (but did get some child benefit in the earlier years before the taper off rules started in 2013)

@rinakaur7245 7 месяцев назад

That child benefit hack is a no brainer - not enough people know about it. I encourage friends/family to do that if they can afford to. A big misconception is if salary over £50k, then they start to lose some child benefit....they don't realise its "income" over £50k.

@Heidi123 7 месяцев назад

Taxable income.

@b-m-c 7 месяцев назад

If say you had salary of £75k and pay 20% into pension (£15k), should you be fine to claim Child Benefit from April 6th 2024 as your income is 60k?

@JD-wn3cc 7 месяцев назад

@b-m-c yes,.in that instance you would be able to take the full benefit and at the end of the year (April 2025) you would pay zero back on the child benefit, as your p60 would say taxable income of 60k

@MrBenjjj6 7 месяцев назад

You are doing great work and I can't find information and examples this specific and relevant to myself anywhere else, thank you for continuing to publish it.

@michelangelodepalma3333 7 месяцев назад

Great video, James, as usual. A small note on minute 3.25 - the pension provider will add 25% (not 20%) to the amount you contributed. You calculated it right though. On a side note, I am seriously thinking of changing countries as this taxation system does not allow a motivated family to critically improve their status if they are working as employees and there is no wealth passed from previous generations.

@garrehsponges 7 месяцев назад

My main concern with pensions is retirement age. Kinda crazy the government effectively locks you into a contract whereby the goal posts are persistently extending. I'm in my 30s and worried retirement age will extend well into the 70s - and with a mixed picture on life expectancy (likely due to NHS floundering) it does make me a bit anxious and wonder if should live for now than later. Would be great if you made a video on that topic James! 🤔

@Crazydiamond_1974 7 месяцев назад

This makes it even more important to take control of the situation and retire on your own terms, not theirs…

@barnybug 7 месяцев назад

This is great advice, the only infuriating part is how poorly this is managed by HMRC. You're required to speak to someone every 3 month renewal of tax-free childcare to confirm your adjusted income will be below the limit - and for us (and others I gather) sometimes it's just (unrightfully) refused outright - so having to take it to Mandatory review to get it approved (which takes weeks to sort). The main problem being on their system they can only see your salary, and not the extra pension contributions.

@MPD90 7 месяцев назад

That sounds really frustrating. I'm guessing salary sacrifice pension contributions would be visible to them but not private contributions?

@barnybug 7 месяцев назад

Yes, I should think so. They seem happy to take it on your word when you confirm by phone you're making contributions and know what you're doing - but you have to get put through to the "Eligibility" team first though who understand.. (I've been told by the first line that if your salary is a pound over you don't qualify!).

@seancrowe3353 7 месяцев назад

The child care hours aren't related to income, you just need to be in work

@barnybug 7 месяцев назад

@@seancrowe3353that's the base 15 hours, to get the full 30 your salary needs to be under the threshold

@barnybug 7 месяцев назад

@@seancrowe3353that's the first 15 hours, for the full 30 hours its based on adjusted income under £100k

@abigailmckernwalkingwithpo4582 7 месяцев назад

Hi James! I am an old friend of your Mum’s and am now a subscriber! Thank you for your advice!

@beeb2532 7 месяцев назад

Thank you. I agree its nuts that more isn't taught in schools. (Work colleagues and myself recently ran a few school workshops as part of a financial education programme my employer - a bank not an education provider - provides, but there really is such a gap in this area of education).

@majordelays4909 6 месяцев назад

This is good. So many folks don’t understand money it’s outrageous.

@davidt208 7 месяцев назад

Thank you so much for putting this together James. Absolutely top rate video. I'm a bit of a nerd on this so I was already aware of the topics covered, but you've presented this beautifully and in a way that is clearer than I've seen elsewhere. It's so important to highlight because if everyone understood this I doubt they would describe the current system as fair, with it's tax cliff edges. For now, those of us impacted can play with pension top-ups to mitigate but long term there really needs to be a strong lobby for smoothing the marginal tax rates out in a more progressive way. We are in danger of talented, aspirational people getting to a point where it feels like there's no value in earning more, and when that happens the economy, and thus everyone, suffers.

@stephengreen8986 7 месяцев назад

You did something similar last year. I am drawing my pension now but followed your advice and put £2880 into Vanguard funds. The taxman made it up to £3600. That £3600 has risen to £4060. Goes without saying that I shall be repeating this in April.

@lileli7177 6 месяцев назад

What an absolute gem! Exactly what the doctor ordered. Clear & concise. I've subed & liked. Keep 'em coming mate👋

@muratbayral 7 месяцев назад

James, thank you so much! This was helpful! I have an ISA but I am also considering SIPP.

@markeh1971 7 месяцев назад

A sip can be mighty useful! For me it’s about not paying 40% tax on the small bit that goes over the threshold. It also lets you invest the money and know it is there, or share will be. Take care M.

@PhilipMorgan-sq5tp 7 месяцев назад

An excellent summary of our rather bonkers tax system and some great ideas! Thank you James

@nogunde 7 месяцев назад

This is the clearest explanation I have ever had on this. Thank you very much. You just saved me a couple of grand and stress

@Stevo4565 7 месяцев назад

Thank you so much James. I've found all of your videos incredibly helpful and have started to use the concepts you describe.

@JamesShack 7 месяцев назад

That’s great to hear!

@simongeorge2505 7 месяцев назад

Thanks. I have jsut decided to retire at 57 having done pretty well on the investment side but how to now get at those funds as tax efficently as possible is a minefield to say the least. Like your example I had planned to live off ISA's for a while and leave my pensions alone but taking the £12k+ personnal allowance makes sense.

@christopherpitt3106 7 месяцев назад

I think you may be wrong on part of the 100 to 125k example. Everyone is entitled to at least 15 hours of free childcare for over 3's until they go to school. Its the additional 15 hour's that take it up to 30 that you lose when earning over 100k. This does change the cost benefit calculation slightly.

@JamesShack 7 месяцев назад

You are correct it’s just the 30 hours you’d lose.

@christopherpitt3106 7 месяцев назад

Love the videos by the way.

@sircoynie 3 месяца назад

Great video, really helped me (I hope). You mention that there are lots of guides on how to complete a self assessment but all the guides i have seen are for self employed people. Could you direct me to the best guide you have seen just for personal pension self assessment declarations? Thank you.

@davidbferguson 7 месяцев назад

Hi James, great video, thanks. One question: in your linked guide, in Step 3, you say: "... we deduct pension contributions that you have made with money you have already paid tax on. These types of contributions include: - Personal contributions to a private pension (such as a SIPP) - Contributions to a net-pay workplace pension scheme". I believe that you mean to say "Contributions to a *relief at source* workplace pension scheme"? Net pay schemes deduct the employee contribution before tax. A video with some illustrations on net pay vs relief at source vs salary sacrifice would be really good (although new to your channel so may have missed it!)

@alistairmayor8115 7 месяцев назад

Mad useful! Props for putting all this together James.

@100uo 7 месяцев назад

Outstanding video, James! Nobody on RU-vid talks about this stuff. Could you go into more detail into why Salary Sacrifice is better than Voluntary Contributions please? You mentioned it's due to National Insurance being paid vs not, but I would love to know more please. Thank you again!

@lygiabird6988 7 месяцев назад

It’s because via salary sacrifice the pension contribution is made out of pre tax salary, lowering your total salary overall and therefore lowering the amount of NICs both you and your employer pay (as well as lowering the amount of your salary is subject to income tax, and potentially preventing your personal allowance being reduced if your salary is over £100k).

@MrDuncl 7 месяцев назад

Another trick is to lease an EV on salary sacrifice. The Taxable benefit is deemed to be worth about £30. It explains why there are so many nearly new EVs in the car park at work.

@JamesShack 7 месяцев назад

@@MrDuncl This is very popular at the moment.

@MPD90 7 месяцев назад

Lygiabird has nailed it, albeit in a slightly complicated explanation. In essence, if you salary sacrifice there's no NI paid on the salary in the first place. If you pay into your pension after receiving the income, you can get relief on the income tax but not on the national insurance contributions.

@100uo 7 месяцев назад

I understood it now, thank you all! OMG, this video is the best ever!

@aumsy1 7 месяцев назад

I got to say, these charts you keep popping up are golden for interpretation! Keep up the good work

@jamesboswell7920 7 месяцев назад

This was extremely helpful, thanks James. At the end of the video you alluded to the benefit of flexibility that ISAs provide over pensions, which is something I have been weighing up a lot recently. I am in my mid 30s and dreaming of a retirement before I turn 57 or 58, so currently my ISA investments greatly outweigh my defined contribution pension pot. I understand that pensions offer superior tax saving opportunities but would be interested to hear your take on how ISAs can better facilitate an early retirement over pensions and particularly the best way to start extracting from the ISA to top up pension contributions later on. For a future video, perhaps 😜 Also, I have read online that the normal minimum pension age may rise to 58 around 2034. Do you expect this to keep rising to 60 and beyond by say 2050?

@majordelays4909 6 месяцев назад

These moving goalposts are so unfair. Some folks won’t live to dizzying ages.

@Soundwave1of9 7 месяцев назад

This is really great, thank you. If you could do a focused video on £100k plus salary and no child care considerations that would be great. I need to go back and watch this again, slowly, to unpick the childcare. I'll look at your materials as well. 👍

@TJ-db9lg 7 месяцев назад

Excellent advise as per usual, I'd have missed the taxable benefit element too eg. Bupa although (luckily?) I don't get those..

@LaraJoannaJarvis 7 месяцев назад

Great video, James! I’ve just shared some of it in a vlog I’m filming today to help my audience find it. Really helpful and concise! Bringing down that taxable income is so important, but shocking to think these bands aren’t being bought up in line with inflation and how much we need to earn these days to live the same life we did 5 (+) years ago. Thanks again for the great content ❤

@TheHousey1 7 месяцев назад

Hi James, could you do a video about investing money in shares v in property? Im stuck between the 2 and would love to see your iconic breakdown of the above problem!

@alastairwilson4564 7 месяцев назад

This is a wonderfully simple guide to pension savings, everyone should watch it!!

@Discombobulate453 7 месяцев назад

Man, I’m so glad I’m learning all this stuff relatively early!

@louisryan6902 7 месяцев назад

It’s also absolutely ridiculous income tax is higher than capital gains tax. Doing nothing to make money should never be taxed less than hard work

@JoystickJives 6 месяцев назад

Hi James, Great and informative video. Thanks for putting this together. You mention in this video of a calculator you have created to work out pension contributions to keep out of the higher tax bands?

@JamesShack 6 месяцев назад

It's a guide; it's in the description of the video.

@mehulvij9357 7 месяцев назад

Hi James, your video has come at the perfect timing - for this month I have elected to put as much my money in pension this month. I have opened up a SIPP with interactive investor - where/which fund would you recommend I put this money into,

@stubrady0101 7 месяцев назад

amazing you have just saved me at least 7k thank you and keep the videos coming

@IRunDaily 7 месяцев назад

The repayment of CB has frustrated and worried me for the last few years as my salary has slowly increased. I've stressed I've completed the self assessment incorrectly and know so many people that just opt out to save the worry. What I don't understand now is how i will start to recieve the CB again? I understand that it is now calculated through my PAYE and I now start paying tax at about 5k. Will those tax thresholds be automatically adjusted and my pay just increase!? I still 'recieve' the benefit every four weeks. Thank you allowing ordinary people a little bit of insight into what we could and should be doing; it's greatly appreciated!

@JamesShack 7 месяцев назад

As you say, you're still receiving the benefit so the change will be seen on your payslips. If you sacrifice your salary to get down to £50,000, it should all happen automatically. If you make a personal pension contribution, it will be sorted out when you complete your self-assessment tax return. If you have completed the box that says "How much of this pension contribution is a recurring contribution" (it's called something like that), then your tax code will update for the following year with the expectation that you'll make the same contribution To be clear, I'm not an accountant, so completing tax returns is not my forte.

@guyr7351 7 месяцев назад

Great video James, even though with grown up kids the savings related to child allowances etc has no impact, nor childcare. Some would say nice problems to have if your earning £50-60K and then over £100K, I would love the Government to develop the auto enrolment of pension to also Include allowing salary sacrifice. Last company I worked for would not allow this, and also offered no matched payments other than what they had to pay. I had through a previous job been making salary sacrifice and that company gave us the NI savings and also enhanced matching of contributions upto 8%. You would think as the Governments have always wanted to reduce the costs and numbers of the public sector they would overhaul the tax system making it much simpler, possibly saving many roles in HMRC. The whole system needs overhauls as already it’s reported far more benefits go unclaimed than are lost to tax evasion.

@leebailey229 7 месяцев назад

I left my job due to 60% bracket. I no longer utilise my global level skills in the UK. Instead I live off investments. My knowledge and talent is wasted and their is ZERO point working in the UK. GO OFFSHORE

@0rrin 7 месяцев назад

Where do you live now?

@ijw2009 7 месяцев назад

This was very helpful thanks James and is a some real food for thought. I'm a simple public servant myself but my partner is self-employed and a relatively high earner though she's noticeably made less this year than the previous year which means the £100-125k window is very much in play. I had forgotten that over £125k you lose the 0% allowance so I might now give a lot thought to putting more into her private pension than previously planned, particularly if most of that money is only otherwise going to the taxman... I might also get our tax-free childcare entitlement back too which would help as we are very much in your example of the 2 kid household.

@chrissaysno 7 месяцев назад

Any chance you could do the same sort of analysis for Scotland? It’s getting hella confusing up here with all the rate changes . . .

@Ashley-po3xu 6 месяцев назад

James, I've thought of a crazy idea whilst watching your video, would love to hear your thoughts. If you withdraw from your SIPP before age 55, you are charged a punitive tax fee of 55%. However, if you earn £125k and sacrifice £25k into your SIPP, then you get a tax saving of 62.5%. Can you see where this is going? Scenario 1 (Just take income) You earn £125k and do not contribute any to your pension. That £25k is charged at 62.5% so your takehome over £100k is £9,375 Scenario 2 (Pension switch-a-roo) You earn £125k, you sacrifice £25k to your SIPP and then immediately withdraw it at a 55% charge. That 25k then is charged at 55% so your takehome over £100k is £11,250. So if you really need the money and cannot afford to put it in your pension for savings, you can profit by doing a switch a roo by up to £1,875. I guess when they made the 55% punitive rate, they didn't realise they would ever have a 62.5% tax bracket!

@mooremoneymakin 7 месяцев назад

Brilliant video. Some of this stuff I was aware of but there's still some very useful bits in there for me.

@curiousjoe395 7 месяцев назад

That’s a superb video James. I’ve tried to follow it as closely as I can… Couple of questions please: 1. If my pension contributions were to the level that I am now eligible to child benefit, will that automatically be calculated and credited as part of my tax return or do I need to enter any specific figures for this? I am not currently eligible for child benefit but have made large pension contributions this year. 2. The effective tax relief on pension has been a source of confusion. I now use my tax return as a calculator. At the start of the tax year, I will meter my expected salary, estimated expenses and benefits in kind (fairly consistent across years) and then play around with pension contribution amounts to see what relief is available. Is this a sensible approach and does it capitalise on the approach you are describing?

@jez-s 7 месяцев назад

Excellent advice. Do the same principles apply for those without children?

@OffTheRadarFilms 7 месяцев назад

If i could give more than one Like i would. I've made many changes to my pension and investing through your videos such as calculating my expenditure and calculating my future pension requirments with your spreadsheets, adjusting my pension contriubtions to ensure these requiremetns are met, using platforms and funds with lower fees to increase the amount that is left in my pension. Many many thanks

@nunuknowstheway6710 7 месяцев назад

£100k plus has been frustrating as I have been doing exactly this. I now contirbute a silly amount to my pension each year and have pretty much been going backwards in spending power as the bracket doesn’t increase with inflation. My pension has done incredibly well but I’m still 35 years away from retirement…

@rss112 7 месяцев назад

Thank you so much. Im being taxed to the hills. Last year I had to remove child benefit. However this year we can claim again. I will be using the benefits of tax relief.

@brendansmith7725 7 месяцев назад

Hi James, I think my head just fell off after this great video, I've been so ignorant that you can effectively keep some or all child benefit above £60k salary amounts, feel kind of stupid now! 🙈

@rich_in_paradise 7 месяцев назад

I've claimed a tax refund on personal pension contributions without having to submit a self-assessment return. I just spoke to someone on the inland revenue website through their text chat feature, gave them my details and explained what I'd done and they said they'd adjust my tax based on that. Got a cheque in the post for the tax I was due a month later.

@jonathh14 6 месяцев назад

Right, I am new to your content and OMG. I like to think I am reasonably savvy but your mortgage video. Mind blown. Additionally the idea you can pay into your pension if dton't earn anything is new to me. Question, if I may, you said about paying into a partners pension if they aren't earning to get the relief. However, as a higher rate payer (without unlimited funds) is it ever worth paying into their pension so they get relief? Surely I'd always be better off paying into my pension so I get the 40% relief? Is that true? ?? Much likes and subscribes Jon

@stevanpopovic2982 6 месяцев назад

Great video. Unfortunately, I’m only seeing this at the start of the new tax year. Is there anyway to alter the previous tax year retrospectively by making a late pension contribution?

@iainhunneybell 7 месяцев назад

Pure gold @James. One comment, one question: Comment: At 05:18, I think it would have been clearer to explain taking £16,760, 25% of which would be tax free draw-down, leaving £12,570 which is the personal allowance and so also tax free. Just an easier way to understand: Why £16,760 and what’s this 25% tax free bit? Question: You mention being able to make a contribution of £2,880, topped-up with basic rate tax relief to £3,600 _even with no income._ Does the £720 tax top-up apply even if the individual is not paying tax, i.e. is it automatic irrespective of the person’s personal tax contributions in the tax year in which the contribution is made? I’m presuming yes, as ‘no income’ would suggest ‘no tax’, unless there was unearned income?

@JamesShack 7 месяцев назад

Yes that sounds a little easier to understand. Yes, You get tax relief even though you paid no tax.

@iainhunneybell 7 месяцев назад

Thank you very much indeed @@JamesShack. Your 'trick' of withdrawing pension whether you need it or not is a _very_ well made point. You might consider leaving pension invested until needed and using any non-pension savings until that time. In fact, as you so very nicely point out, you should withdraw pension first even up to the high tax band each year so as to maximise personal allowance and basic rate tax. Even if you don't need the amounts, better to use the low-tax opportunity, year by year, and simply invest unused withdrawal back into an ISA or other investment and let it grow there, but minimise the impact of taking larger amounts of pension later and potentially incurring higher tax charges. Of course, money withdrawn comes within the scope of IHT, but this is still a _really helpful_ idea to consider and option to balance, so thank you for taking the time to explain this 🙂

@geltonbeltonwelton 7 месяцев назад

Always great content. Keep up the good work.

@JamesShack 7 месяцев назад

I will, thank you!

@samatronn 6 месяцев назад

I don't suppose you could do a video about being a couple (28-33ish) who don't intend on having children and work in good IT jobs, and how we can make the most of our money? Right now, I am hoping to either retire early or start a passion business or career. Do I have any smart moves to make? ie. aim for a certain salary to make the most of tax? any non-child related tax breaks?

@majordelays4909 6 месяцев назад

Ideally earn 1 million each. That would be a big brain move

@Revitpuds 7 месяцев назад

I was screwed over by BIK company car costs which effectively meant my wages were inflated but I didn’t have the physical cash and problem is paying into a pension even costing 1.8k I didn’t have the spare cash so ended losing child benefit. My company didn’t renew the cars for 5 years so the Bik increased costs

@MrWhoAmI57 7 месяцев назад

Great video. I annoyingly have a paid salary of between £100-125K but then my RSU shares push my salary on my P60 close to £200K so guess I can't do anything about the 60% tax bracket

@nunuknowstheway6710 7 месяцев назад

You can if you didn’t contribute the maximum amount to your pension in the last 3 years. Carry forward those last 3 years and do a one of £100k contribution.

@Whalesby 7 месяцев назад

Just a couple of quick notes. 1. You don’t lose the 15 hours free childcare for 3-4 year olds if you go over £100k. Everyone gets 15 hours for 3-4 year olds but if you earn less than £100k you get 30 hours. So the value of the benefit is probably half of what you’ve stated for most people as you only lose 15 hours. This will change as more eligibility for younger children comes in as that will only be for people earning less than £100k 2. There’s also the annual allowance taper to think about for pension contributions. Admittedly that is only for very high earners (above £260k) but is still worth mentioning at least as a note when you say can contribute up to £60k

@simonebruschi9793 7 месяцев назад

Great video. I pay into nhs 2015 scheme. Can I make additional pension contributions into the NHS pension AND pay into a SIPP and then use the sum of the two contributions to get back below the 100k threshold?

@rzzr896 7 месяцев назад

The short answer is yes. You can pay into more than one pension. I don't know your pension details but it might be better paying all extra contributions into a SIPP.

@simonebruschi9793 7 месяцев назад

Thanks so much for the answer. Why you think SIPP only is better? The nhs is a good one as far as I understand. But of course I cannot touch it until I'm 68-70 I guess. I was thinking to pay 70% into sipp and 30% into work nhs pension.

@MrDuncl 7 месяцев назад

@@simonebruschi9793 So late in the year a SIPP might be your only option if you are thinking about this tax year.

@tancreddehauteville764 7 месяцев назад

@@simonebruschi9793 You can take your NHS pension from age 55 currently, then rising to 57 from 2028, and probably 58 and so on. Obviously it will be reduced from the optimal amount but you can buy added pension. I don't see your logic in putting money into a SIPP when the NHS pension is probably the best scheme in the UK.

@rzzr896 7 месяцев назад

@simonebruschi9793 To be honest I know nothing about NHS pensions. Generally having your own SIPP is a good thing as you can choose the investments (an all world ETF) but if the NHS one has a better outcome that's the one to go for. 1 1

@gilcarag274 6 месяцев назад

My son is 8yrs old but I’m definitely going to open a Junior SIPP and Junior ISA before end of the year to get the govt contribution on the pension and to start saving for his future. Also going to maximise my wife’s pension. So many changes this year :-)

@bigandy9 6 месяцев назад

Well this has been a helpful video, recommended by the RU-vid algorithm! Thanks!

@bungerbrad 7 месяцев назад

great video James. To clarify - I am a higher rate taxpayer. If I take money from my ISA and move it to my SIPP, the SIPP provider will add 20% and when I complete my Self Assesment I will get a refund?

@Garcia061 7 месяцев назад

My kid is now 15 and I’ve never had child benefit. Was I earning too much or just totally unaware i was eligible?

@AR-ic6jf 7 месяцев назад

Wow what a content.Brilliant work

@Venable98 7 месяцев назад

If I understand this right - someone with income currently under the higher tax rate and and child benefit thresholds should consider making lower pension contributions now and saving/investing the money, in order to make larger pension contributions later on in life if and when they earn more, in order to bring them under the thresholds?

@jno5 7 месяцев назад

James; will you do a video for best options for people on Means Tested Benefits (Universal Credit / Means Tested Employment Support Allowance etc) and for people like me who have worked but had to finish work due to health conditions, so could be on a Private Ill Health Pension and none Means Tested Benefits (Personal Independence Payments / Contributions Based Employment Support Allowance) The two will be very different, with the first probably not being able to save anything Thanks

@raducanualberto 6 месяцев назад

Hi James, want about other type of salary sacrifice? Like Car salary sacrifice are considered the same in reducing the income for more tax efficient.

@JamesShack 6 месяцев назад

They should work in the same way, but you should check with your scheme provider.

@sadaksafa 7 месяцев назад

Can you do a video for small limited company director

@glynjones1112 7 месяцев назад

Hi James, loving all your video's, but how can someone who will be receiving a DB pension manage their tax in their pension amount each year? Theres lots of info on making DC pensions as tax efficient as possible, but not so much on DB. Some video time on this would be most welcome. Thanks

@MPD90 7 месяцев назад

Pretty much the same I believe. You can still privately open a SIPP and contribute to that pension account to reduce your taxable income, having a DB pension doesn't prevent that, you just need to be aware of the impact of your DB pension arrangement on your annual allowance.

@JamesShack 7 месяцев назад

Hi glyn some schemes allow you to make additional voluntary contributions to the scheme or you could setup your own personal pension on the side.

@glynjones1112 7 месяцев назад

Sorry, perhaps I'm not clear (or more likely not understanding it 🤦) but when I get my pension, I will get my tax free annual allowance factored in. Thereafter, I'll pay income tax on the rest. But when I hear you talk about drawing income from a DC pension, 25% of that sum is also tax free. I imagine this is the same for DB pension. So if I was getting a pension of £20k in a year for example, would £5k also be tax free? Adding the tax allowance, would I not pay tax on £17,570 of that £20k? I'm sorry to sound ignorant, but I want to understand. Thanks 👍

@glynjones1112 7 месяцев назад

@@JamesShack I pay into a linked AVC also 👍

@christianaenebeli 7 месяцев назад

Thank you @James. My understanding is that the govt go by gross income. So if I put more into pension, doesn't change the gross on paper right? Scratching my head. Please clarify.

@WillBentinck 7 месяцев назад

James, this is amazingly useful thank you. I have a question about your guide: in section 3, you say that £100 paid into a pension after tax reduces the ANI by £125, but later you say that I'd need to pay £800 to get £1,000 gross pension contribution - one suggests 25%, the other 20%. The gov.uk guide also says £1.25 for each £1 paid into a pension ost-tax. So which is it? Or are they two different things with different rates?

@JamesShack 7 месяцев назад

£125 - £100 and £1000 - £800 is both 25% more. £800 is the net contribution £1000 is the gross contribution.

@andru.mp4 6 месяцев назад

Great video! Is there a link you can share to help further explain how the 10k tax refund on 125k income is calculated? 14:32

@alanmead755 7 месяцев назад

Great video, but what happens when NI is abolished and BR is 30%.

@davidhodgson3901 7 месяцев назад

That’s not going to happen unless the Tories win the election.. #unlikely

@gavbalchin 7 месяцев назад

Hi James, great video! Could you please go into a little more detail about the short section at 14:20, where you say that via a self assessment tax return you can claim an additional £10k of tax? On what basis can you claim that tax relief? Thanks for all of your videos!

@100uo 7 месяцев назад

You paid 60% tax on the amount between 100k and 125k. That's 15k tax. Then you make a contrition to bring your income back down to 100k. The pension provider only gives you 20% tax relief (5k). So you need to get the remaining 10k back from the government using a self assessment tax return.

@gavbalchin 7 месяцев назад

@@100uo Thank you!

@NMD2013 6 месяцев назад

Great video, thanks. The bit I'm confused about is how this works if you have a mix of PAYE taxed income, and some yet-to-be-taxed additional income (e.g. foreign income). Can the pension contribution reduce my overall taxable income in the same way, if some of that income is yet to be declared/taxed? Or does it only work for income that's already been taxed through PAYE? I'm trying to work out how much I can afford to contribute to my pension (today!), based on what I will owe in tax on the foreign income, but am unsure what calculation to use given the mix of incomes and their tax status.

@Jazzynet100 7 месяцев назад

Top lad as ever, liked and shared!

@JunoonRocked 7 месяцев назад

If your employers pays benefits like health insurance via P11D, what would be a good way to find out the value of those benefits before the tax year ends please?

@JunoonRocked 7 месяцев назад

I found the value of the benefit (cost to employer) in my employer's benefits portal.

@mikerodent3164 7 месяцев назад

Well explained. One thing you missed, which I think should be briefly mentioned in this sort of thing (you may have mentioned it elsewhere): if you are an employee but also a DIRECTOR of the company you work for, your max pension contribution is NOT limited by your salary, but is £60k come what may. I have a micro-company of which I'm the director and this year have "persuaded it to pay me" £12570 in income. But so far I've "got the company" to allocate a SIPP payment of nearly £40k. In fact I'm thinking of making it higher before end of March. Of course the tax efficiency then comes from reduced corporation tax rather than personal tax relief. And I'm not entirely clear how this sort of thing carries through from year to year. But lots of people have micro-companies these days and pay themselves the LEL for salary.

@zpr592 7 месяцев назад

Hi, thank you for this. Would deduction of £312 working from home and mileage claim difference from what employer pays v hmrc allowance come off this as well? So add private medical but deduct these?

@johnnyjohnny777 7 месяцев назад

What about who has NHS pension? I'm already contributing with the maximum allowed. Can i still have a personal pension reduced my taxable income?

@JamesShack 7 месяцев назад

Yes you can.

@firstnameg6227 7 месяцев назад

Great video. What happens if you put too much money into your pension and it increases the value beyond the threshold? How can this be avoided?

@MPD90 7 месяцев назад

Avoiding it is surely as simple as not contributing more than the allowance? That's squarely on you, use a calculator! You can contribute more than the allowance to your pension if you wish, but anything over the allowance won't get tax relief.

@rzvr4490 6 месяцев назад

Good info but what about those earning under 50k ? I believe under 2% of employees are high income earners and about 20% between 50k to 100k , these are not accurate numbers but nearby

@albedo0point39 7 месяцев назад

This is great content James! I’m doing all the right stuff already… but the more people who know about this the better. Also, the government wouldn’t get away with these stupid threshold traps if the public and mainstream media were more finance literate!

@chrisnuk 7 месяцев назад

I'm not sure. I have explained this to a few people and at least two have said: if you are lucky enough to earn over £100k you shouldn't be getting any help with your kids. I'm sure it's that same stupid envious logic for the tax-free allowance. I get frustrated with this logic because if I wasn't paying £2k per month for childcare per child and I didn't have a huge mortgage because house prices are astronomical, I'd have a decent take-home wage. If I had that wage, had paid off my home, and lived outside of London I'd be minted! I'm debating reducing my hours and spending that time with my kids, it's a win-win-win as I get more time with them, I'll pay less for childcare and get to keep more of my money. The thing that stops me is I've only just started earning this amount, I don't know how long I'll be this lucky (so I should live frugally and put it in my pension) and I don't want to look like a slacker at work. I'm aware it's a nice problem to have.

@askmartinez6409 7 месяцев назад

It’s like you are penalised to earn more money. And the money you do earn you can’t even use because HMRC will start charging interest if you miss the deadline

@davidarnold3003 7 месяцев назад

Thanks James, can Inheritance be added to a SIPP and gain tax relief?

@james2506 7 месяцев назад

Hi do you have any videos for pension planning for those who have the lowest tapered allowance each year?

@arransingh3709 7 месяцев назад

Hi James great video. Just to get it clear if earning over £100k, I put the difference in my salary sacrifice pensions through work (so i am below £100k), would I then be eligible for free childcare? The reason why I am asking is because the childcare advisor said I need to have put the difference above £100k into my private pension and not the company salary sacrifice to be eligible. It will be good to get that clarification as I can still make additional contribution and be eligible for free child care. Thanks!

@JamesShack 7 месяцев назад

You can get 15 hours free childcare for 3-4 year olds regardless of how much you earn. But to get the additional 15 hours (up to 30 hrs) your taxable income needs to be below £100,000.

@nunuknowstheway6710 7 месяцев назад

I use company salary sacrifice and it achieves the same both reduce your taxable income headline figure but in my case the company sacrifice gives me an additional 10% smart uplift from my employer as they have to pay less national insurance on my behalf making it even more beneficial.

@neoKushan 6 месяцев назад

Hey James, can you help settle a debate/query over something said in the video? In the last section you talk about contributing to an ISA, but it wasn't clear if putting money into an ISA means you can claim any tax back or anything like that. Am I correct in saying that you can only claim tax back on pension contributions?

@JamesShack 6 месяцев назад

Yes that is correct.

@JB-mu6qw 7 месяцев назад

I know quite a few people have student loans payments to repay from their salary before they get their net pay after tax. Is the student loan payment taken into consideration to work out how much tax to take from someone's pay? So.. let's say I earn over the 40% tax bracket 63k and I want to avoid paying 40% on £10,000 of my earnings/put it into a pension instead, do i have to pay in £10,000 or can I pay in less than this, as I have I am forced to repay the student loan too?

@JamesShack 7 месяцев назад

Student loan repayments don’t reduce your taxable income. They’re taken from net of tax pay. So if you earned £51k, after tax, but had £2,000 student loan repayments, meaning your take home pay was £49k, you would still have some CB clawed back (in the current tax year).

@JB-mu6qw 7 месяцев назад

@@JamesShack interesting and that's a shame. However another thought is, if I salary sacrifice and reduce income to £52,000 does that mean I pay back less student loans overall, I will never clear that debt... That's an interesting prospect to consider aswell if I can put that cash into a pension which can compound with time. Hmm

@paul83uk 7 месяцев назад

Hi James, where do you find your "taxable income" amount? I think I've always used my P60 amount to calculate for self-assessment and worried I've been missing deducting pension contributions as I didn't know that was possible to do.

@afghitman 6 месяцев назад

Probably not related to this video but, I have more than one work place pension from different employers. How can I tell if I'm better off leaving them untouched or if I should consolidate or do something else?

@glostergloster6945 7 месяцев назад

One other tip, is if you make a private contribution to a pension as a higher or additional rate tax payer, while the actual contribution + 20% basic tax relief goes into a pension, the higher and additional rate (whichever applies to you) tax does not. Meaning you effectively get back 20-25% tax which you can then spend how you want. Its actually a good way of being able to get access to some of the tax money in the short term.

@chrisnuk 7 месяцев назад

I did wonder that. Great tip 👍

@MPD90 7 месяцев назад

This is a misunderstanding, ignoring the NI benefit of salary sacrifice you're left in exactly the same position regardless of salary sacrifice vs private contribution. Let's take an example where your goal is to reduce your taxable income by £1,000 by putting that £1,000 into your pension. If you salary sacrifice the £1,000 into your pension as a higher rate tax payer, it'll cost you £600 out of your pocket (40% tax relief, ignoring the NI benefit of salary sacrifice for simplicity). To achieve the same £1,000 into your pension via a SIPP contribution, you would need to pay £800 (government contributes the £200 balance to give you the same £1,000 in your pension). You'd then get £200 (20%) cash back via tax return. Giving you a net position of £1,000 in the pension, £600 out of pocket (the £800 contribution less the £200 refund). Exactly the same end position either way.

@glostergloster6945 7 месяцев назад

@MPD90 It is the same in terms of benefit. But it isnt the same in terms of where the tax relief goes. With salary sacrifice ALL the tax relief goes into your pension which you cant access until you retire. With private contributions the higher or additional rate tax relief goes back into your pocket via your return as opposed to going into your pension. There is no difference in overall benefit but there is a big difference as to where the tax relief goes.

@MPD90 7 месяцев назад

@@glostergloster6945 No sorry that's a misunderstanding. Stay with me here, I promise I know what I'm talking about! Your baseline number is how much you want to contribute to your pension. You have to compare apples with apples. That number is entirely up to you, you pick the number you want to end up in your pension, and regardless of if you pick salary sacrifice or private contributions as your mechanism the net result is the same (barring the NI benefits of salary sacrifice). In the example I gave above the person is choosing to contribute £1,000 to their pension, and in either event they end up having £600 gross cost to get that £1,000 into their pension, just one way you have to pay £800 at first and claim £200 of it back. Otherwise what you're really saying is if you contribute less to pension you'll have more money now. Well yes, of course, but that's got nothing to do with the method you use and everything to do with just contributing less into the pension (which you could equally achieve by just contributing less via salary sacrifice, end result is the same). Hope that makes sense? If not try adding an example with numbers.

@dnc196 7 месяцев назад

@JamesShack. Thank you for this! Re. your "Adjusted Net Income Guide" and step 1 of that, when you say "Remember, we’re only talking about contributions you have made, not your employer" I'm reading this as I don't include the pension contributions that my employer has paid. is that correct?

@MPD90 7 месяцев назад

Your taxable income is your income less your contributions. Your employers contributions don't reduce your taxable income. However they do count towards the £60k annual allowance for pension contributions.

@JamesShack 7 месяцев назад

This.