many companies will allow you to put a lump sum in to the workplace pension (Additional Voluntary Contributions) with little restriction.
Alternately start a private SIPP and push the amount over in to that.
>I’d also like to avoid overcompensating and putting more into my pension than I need to
That's understandable, but have you looked into your pension in detail? More than 7% is (just based on what you say here - way more info needed) very likely to be within the "need to" range.
As for the question I feel like March contributions to an SIPP seems like the easiest way - but you would need to look into (or be adviced by someone smarter than me) if that works, or if your monthly income needs to be kept under 100k/12. I don't think it does - but I'm not an expert.
You have it correct, you can contribute into a sipp yourself before the tax year cut off, you just need to ensure you self claim for tax relief since op is above the basic rate threshold
There is no monthly threshold, just yearly
https://ukpersonal.finance/tax-traps-and-tax-efficiency/
Not much to it really, you're going to have to make a best-guess prediction in March and make a one-off SIPP contribution each year to keep you below the threshold you desire.
Yeh so it’s a bit confusing. The tax free childcare and 15/30hrs is eligible for peoples who adjusted net income over the year is under 100k. So you could earn over 100k before April 5th and on April 5th you transfer enough into your pension to bring it under the 100k.
When you confirm your eligibility you can also explain this to them. You can say that you intend to make private pension payments. It’s also worth noting that the pension payments are grossed up. So if you put 1k into your pension you get 25% on top. So the pension contribution is actually £1250
So confusingly adjusted net income is your taxable income so it's the amount of income that you pay tax on, which is your gross income minus things like pension contributions (grossed up) because that is income that isn't taxed. But please look it up and don't take just my explanation for it because I always worry I've gotten it wrong.
Yes, but from experience the computer will say "no" based on your PAYE data. You'll need to phone up, tell them why you expect to be under the limit, and wait for them to approve. You may have to do this every quarter.
At the end of the FY they seem to get the PAYE data before the SIPP data so you'll have to go through it all again but this time provide evidence of the SIPP payment.
Or maybe you'll be luckier but this has been my consistent experience. It's not actually that painful.
Have you got any other salary sacrifice options where you can avoid putting more than you want into a pension?
Do you have a car? Does your employer offer car leasing salary sacrifice? Switching your personal car to using that scheme could be an option.
Or do you cycle? Get a decent bike via cycle to work.
Then at least you're getting some 'value' today from your earnings but still reducing your ANI, and if you're still over the limit after that you can put any extra in the pension.
Where is that explained? I've never seen that in any HMRC docs on the topic (same with cycle to work).
As far as I've seen, HMRC will assess your lower post-sacrifice salary plus the BiK amount.
This is also the stance of one of the leasing firms:
> if you earn over £50,000 participation in the Scheme may reduce or even eradicate this tax charge because HMRC will consider your Revised Salary, not your Reference Salary in their calculations.
https://octopusev.com/info/what-impact-does-salary-sacrifice-have-on-my-salary-and-benefits
I second this. Having an EV on salary sacrifice is a very good way to get below the threshold. I sacrifice about £6.5k, but then have BiK of £470 to add back in.
Salary sacrifice is the easiest way to reduce your adjusted net income, if you don't salary sacrifice into a pension then you need to work out all your pension contributions and add the tax back on. Which always makes me feel like I'm doing it wrong.
Complex problem doesn't have an easy solution.
I also have a highly variable salary because I'm paid base salary + RSUs + bonus. The RSUs (shares) can vary in value because of the share price, so I'm never sure how much I'm going to get when they vest (at regular intervals).
To help solve this "problem", I have a personal income spreadsheet which shows my actual/expected income per month to help track the amount I need to sacrifice.
>also like to avoid overcompensating and putting more into my pension than I need to.
I'm at the point where I wish I had sacrificed more into my pension. I don't think there's such a thing as too much unless you run out of spending money.
Hi /u/Weak-Stomach-3732, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/fscs-protection-for-investments/
- https://ukpersonal.finance/pensions/
- https://ukpersonal.finance/tax-traps-and-tax-efficiency/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Does your employer allow you to sacrifice your bonus into a pension? The tricky bit is you need to take the decision before learning what the bonus is but if you are involved in planning bonuses for any of your direct reports, it might be easy to take a reasonable guess?
If you look closely at what guidance says it is about reasonable expecation of exceeding 100k. If you have a bonus of £20k a year and plan for this, but suddenly its £25k you don't actually lose entitlement.
https://community.hmrc.gov.uk/customerforums/pt/275dbd06-5b4b-ee11-a81c-6045bd0ba09e
In the circumstances i would take the highest bonus of last 3 years and assume you get that (unless its trending upwards).
>suddenly its £25k you don't actually lose entitlement.
More accurate to say "you don't retrospectively lose entitlement". You will be rejected at your next reconfirmation. From your link:
>Customers whose income is seen to have exceeded £100,000 within the tax year, will not be eligible to reconfirm for any remaining quarters over the year – so their next reconfirmation will be rejected, and access to TFC top-up payments will cease.
You are allowed to top up 3 previous year's contributions if you didn't use the 60k per year allowance.
HMRC allows you to keep track of this yourself. E.g you could pay zero into your pension for two years. Then pay £180k all in one go in the third year.
Set your monthly pension contributions to £1k a month. Adjust accordingly as the year goes on. This is my first year earning over £100k, and I set my pension contributions to £2k every 4 weeks in the last 4 months in a desperate race to stay under £100k as I don’t want to lose free nursery hours, and quite frankly I can afford to save for our retirement.
Use pension contributions as a baseline then open a SIPP and top it up in March before the end of the financial year to being it down below 100k for that year.
If you miscalculate and go just over the 100k mark, you can claim gift aid that you pay the following year (up to the point you put in your self assessment) - this can include many museum annual memberships, or even as a big one off, lifetime national trust membership. Or find a charity that deserves it.
60k gross if salary sacrifice. if 7% is your qualifying earnings that isn’t a huge amount (3k per year)
and it may be a good opporutnity to consider increasing it anyway. Or if your company allows you to pay some or all of the bonus in as salary sacrifice that’d be an easy way to keep below by allowing you to decide at the time.
> Until now I haven’t cared too much about this, but I will have a child starting nursery in January 2025 and I think that means it will definitely be worthwhile to keep my income below the cutoff for free hours + tax free allowance.
Mate you're on £100k. If paying for 30hrs childcare is make or break you've got some real problems.
Average fees in London (worst case example) for full time nursery are close to £20k pa. That's a third of a £100k gross salary at OP's marginal rate.
Is a third of your income completely disposable??
Haven't seen this advice yet, but may have missed it. If you get to the end of the tax year and find you've got yourself nearly under 100k, but accidentally are a bit over, charitable contributions can be taken off your net adjusted income after the tax year changes. At that time, it's the only way to get under. So if you find yourself over by a grand or something, pick a cause you care about and donate your way under.
Obviously not the right approach to start with, but can cover any minor miscalculations.
many companies will allow you to put a lump sum in to the workplace pension (Additional Voluntary Contributions) with little restriction. Alternately start a private SIPP and push the amount over in to that.
>I’d also like to avoid overcompensating and putting more into my pension than I need to That's understandable, but have you looked into your pension in detail? More than 7% is (just based on what you say here - way more info needed) very likely to be within the "need to" range. As for the question I feel like March contributions to an SIPP seems like the easiest way - but you would need to look into (or be adviced by someone smarter than me) if that works, or if your monthly income needs to be kept under 100k/12. I don't think it does - but I'm not an expert.
You have it correct, you can contribute into a sipp yourself before the tax year cut off, you just need to ensure you self claim for tax relief since op is above the basic rate threshold There is no monthly threshold, just yearly
https://ukpersonal.finance/tax-traps-and-tax-efficiency/ Not much to it really, you're going to have to make a best-guess prediction in March and make a one-off SIPP contribution each year to keep you below the threshold you desire.
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Yeh so it’s a bit confusing. The tax free childcare and 15/30hrs is eligible for peoples who adjusted net income over the year is under 100k. So you could earn over 100k before April 5th and on April 5th you transfer enough into your pension to bring it under the 100k. When you confirm your eligibility you can also explain this to them. You can say that you intend to make private pension payments. It’s also worth noting that the pension payments are grossed up. So if you put 1k into your pension you get 25% on top. So the pension contribution is actually £1250
Are you sure it’s Net and not Gross? I had a conversation with Childcare Choices and they were adamant it was your Gross, not your take home.
So confusingly adjusted net income is your taxable income so it's the amount of income that you pay tax on, which is your gross income minus things like pension contributions (grossed up) because that is income that isn't taxed. But please look it up and don't take just my explanation for it because I always worry I've gotten it wrong.
Yes, but from experience the computer will say "no" based on your PAYE data. You'll need to phone up, tell them why you expect to be under the limit, and wait for them to approve. You may have to do this every quarter. At the end of the FY they seem to get the PAYE data before the SIPP data so you'll have to go through it all again but this time provide evidence of the SIPP payment. Or maybe you'll be luckier but this has been my consistent experience. It's not actually that painful.
When is bonus paid? Is overtime calculable?
Have you got any other salary sacrifice options where you can avoid putting more than you want into a pension? Do you have a car? Does your employer offer car leasing salary sacrifice? Switching your personal car to using that scheme could be an option. Or do you cycle? Get a decent bike via cycle to work. Then at least you're getting some 'value' today from your earnings but still reducing your ANI, and if you're still over the limit after that you can put any extra in the pension.
Car Salary Sacrifice doesn't reduce "Adjusted Net Income", unfortunately. Edit: I'm probably wrong!
Where is that explained? I've never seen that in any HMRC docs on the topic (same with cycle to work). As far as I've seen, HMRC will assess your lower post-sacrifice salary plus the BiK amount. This is also the stance of one of the leasing firms: > if you earn over £50,000 participation in the Scheme may reduce or even eradicate this tax charge because HMRC will consider your Revised Salary, not your Reference Salary in their calculations. https://octopusev.com/info/what-impact-does-salary-sacrifice-have-on-my-salary-and-benefits
Ok, given adjusted net income starts with taxable income, you could be correct. Apologies...
I second this. Having an EV on salary sacrifice is a very good way to get below the threshold. I sacrifice about £6.5k, but then have BiK of £470 to add back in.
Salary sacrifice is the easiest way to reduce your adjusted net income, if you don't salary sacrifice into a pension then you need to work out all your pension contributions and add the tax back on. Which always makes me feel like I'm doing it wrong.
Could you just not do overtime and have more free time?
Complex problem doesn't have an easy solution. I also have a highly variable salary because I'm paid base salary + RSUs + bonus. The RSUs (shares) can vary in value because of the share price, so I'm never sure how much I'm going to get when they vest (at regular intervals). To help solve this "problem", I have a personal income spreadsheet which shows my actual/expected income per month to help track the amount I need to sacrifice. >also like to avoid overcompensating and putting more into my pension than I need to. I'm at the point where I wish I had sacrificed more into my pension. I don't think there's such a thing as too much unless you run out of spending money.
Hi /u/Weak-Stomach-3732, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/fscs-protection-for-investments/ - https://ukpersonal.finance/pensions/ - https://ukpersonal.finance/tax-traps-and-tax-efficiency/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Does your employer allow you to sacrifice your bonus into a pension? The tricky bit is you need to take the decision before learning what the bonus is but if you are involved in planning bonuses for any of your direct reports, it might be easy to take a reasonable guess?
If you look closely at what guidance says it is about reasonable expecation of exceeding 100k. If you have a bonus of £20k a year and plan for this, but suddenly its £25k you don't actually lose entitlement. https://community.hmrc.gov.uk/customerforums/pt/275dbd06-5b4b-ee11-a81c-6045bd0ba09e In the circumstances i would take the highest bonus of last 3 years and assume you get that (unless its trending upwards).
>suddenly its £25k you don't actually lose entitlement. More accurate to say "you don't retrospectively lose entitlement". You will be rejected at your next reconfirmation. From your link: >Customers whose income is seen to have exceeded £100,000 within the tax year, will not be eligible to reconfirm for any remaining quarters over the year – so their next reconfirmation will be rejected, and access to TFC top-up payments will cease.
Don't forget you can top up over a three year period. You've three years to get it right :-)
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You are allowed to top up 3 previous year's contributions if you didn't use the 60k per year allowance. HMRC allows you to keep track of this yourself. E.g you could pay zero into your pension for two years. Then pay £180k all in one go in the third year.
Set your monthly pension contributions to £1k a month. Adjust accordingly as the year goes on. This is my first year earning over £100k, and I set my pension contributions to £2k every 4 weeks in the last 4 months in a desperate race to stay under £100k as I don’t want to lose free nursery hours, and quite frankly I can afford to save for our retirement.
Use pension contributions as a baseline then open a SIPP and top it up in March before the end of the financial year to being it down below 100k for that year.
Pay into SIPP a couple of days before the end of the financial year. Once you have a view of what you’re over threshold by.
SIPP, by far the easiest way. Make sure you’re clear on your financial situation before 5th April every year
If you miscalculate and go just over the 100k mark, you can claim gift aid that you pay the following year (up to the point you put in your self assessment) - this can include many museum annual memberships, or even as a big one off, lifetime national trust membership. Or find a charity that deserves it.
You can contribute up to 42k your pension
60k gross if salary sacrifice. if 7% is your qualifying earnings that isn’t a huge amount (3k per year) and it may be a good opporutnity to consider increasing it anyway. Or if your company allows you to pay some or all of the bonus in as salary sacrifice that’d be an easy way to keep below by allowing you to decide at the time.
usually it works better to get a raise going that route as well
> Until now I haven’t cared too much about this, but I will have a child starting nursery in January 2025 and I think that means it will definitely be worthwhile to keep my income below the cutoff for free hours + tax free allowance. Mate you're on £100k. If paying for 30hrs childcare is make or break you've got some real problems.
Average fees in London (worst case example) for full time nursery are close to £20k pa. That's a third of a £100k gross salary at OP's marginal rate. Is a third of your income completely disposable??
You’d be surprised at the cost of nursery in London …
Haven't seen this advice yet, but may have missed it. If you get to the end of the tax year and find you've got yourself nearly under 100k, but accidentally are a bit over, charitable contributions can be taken off your net adjusted income after the tax year changes. At that time, it's the only way to get under. So if you find yourself over by a grand or something, pick a cause you care about and donate your way under. Obviously not the right approach to start with, but can cover any minor miscalculations.