Any accountants on here?

[Littlepeahead]

I need to get my head around the 20% and 40% tax brackets, personal allowances and how things like the value of my private medical insurance as a taxable benefit and payroll giving to charity affect it.

Basically if I have a choice between paying tax at 40% or giving a donation to a few charities such as the Air Ambulance and Headway to keep me in the 20% bracket then I would rather still take home less cash but give the money to a worth cause than the taxman. And I suspect I need to do this before 1st April. I do have a payroll giving account already as I sponsor a very ugly monkey. (I don't mean Chris8886).

[maviczap]

Can't you make extra pension payments direct from your salary, to keep you in the lower bracket?

Think I read it somewhere

[Littlepeahead]

I probably can, and if that is the case I will do that too, but Headway have been giving me and Chris some help lately and so if I can show my appreciation while sticking two fingers up at the tax man then it will give me great pleasure to do so.

[DJ123]

I use this site when it comes to tax/NI/earnings questions

http://www.listentotaxman.com/

[Littlepeahead]

I'm struggling because I get a bonus in December and then our pay rise comes in for January and the private medical changes in April and I seem to pay 2 pension contributions plus I can claim back a bit when I buy cameras and photo gear. I make a monthly charity donation via payroll giving but also have a payroll giving account where I put extra money for additional charity donations. All so confusing!

[Sir Trev]

Understanding your tax liability is not too hard when you lay it out on paper or spreadsheet. It is also a misunderstanding that if you cross into the 40% tax bracket you are worse off as you only pay 40% on income OVER the threshold - the first chunk of your income is still taxed at 20%.

[timwilky]

Get you employers to do a salary sacrifice on your pension contributions. That lowers your salary so you pay slightly less tax and NI, reduces their NI contribution etc. You are slightly better off and your pension contribution remains the same. Win Win.

As sir Trev says, it is only salary above the threshold that attracts 40%. But you end up looking at every salary increase thinking it is not much when the taxman takes half.

[maviczap]

Get you employers to do a salary sacrifice on your pension contributions. That lowers your salary so you pay slightly less tax and NI, reduces their NI contribution etc. You are slightly better off and your pension contribution remains the same. Win Win..

Thanks Tim, that's what I was referring to in my post to LPH, your explanation is spot on

[Sir Trev]

A simple example. Assumes salaried person with simple income stream - having dividends or capital gains etc will complicate things which I'll not cover here:

http://i1210.photobucket.com/albums/cc413/Sir_Trev/Org%20pic%20a%20day/example1_zps98d71d2f.jpg

This shows that even though in the second column you cross into the 40% bracket with a 5k pay rise or bonus you only pay 40% tax on the value above the threshold (which I took from the link Spank added - it changes every year). I've not included NI in this example to make it simple.

[Littlepeahead]

Great, thanks. The bit I get confused on is how I get taxed on the value of my private medical. I think this year it is valued at £1000 though that may increase in April. So do I get taxed at 20% of £1000 or 40% of £1000?

Now we have a £200 excess and my planned surgery is out of the way I may even cancel it.

[timwilky]

It is a benefit with a value, the same a company car etc. simply add its taxable value to your income and that is what you pay tax on. It is not the insurance that you are being taxed on, it is your total income, ie salary+benefits. the spreadsheet posted by Sir Trev shows that

[TamSV]

LPH, I'd forget about the tax brackets TBH. You pay more tax if you get more money. It's all good.

If you want to give more to charity then, fine, do it in the most tax efficient way.

Your private medical cover effectively costs more if you move from 20% to 40% but the decision for you is really whether it's useful cover worth having (by my estimation it definitely is). You're getting either a 60% or 80% discount on the cost - not too shabby either way. What happens if you cancel it? Will your employer give you the £1,000? If so, you'll pay the same amount of tax but have a little more money. If not, you're effectively giving yourself a £1,000 pay cut.

Don't let the tax rate make these decisions for you.

[Sir Trev]

Tim and Tam are spot on. It's all based on total taxable income so don't get hung up on it. Even if you cross into the 40% bracket you still get to take more home than before your bonus/pay rise that caused it.

Private health from your company is of course insurance so only you can say if it's worth it or not to you. Having read about your ops though I'd be taking it just in case of complications or recurrence later on.

[Littlepeahead]

To be fair, I have had well over £600 worth of treatment in the last 3 years what with elbows and heels and physio. I'm no longer needing any treatment on my elbow so the only cost there now is that the surgeon and I have dinner together when time allows and occasionally I do insist upon paying!

The most annoying thing this week is that I am now £15 per month poorer due to the increase in train fare since I just renewed my annual card, yet their services have been worse than ever.

[Teejayexc]

Tim and Tam are, (insert appropriate comment here).

Anyone remember Statler and Waldorf on the muppets?

:D

[chris8886]

I need to get my head around the 20% and 40% tax brackets, personal allowances and how things like the value of my private medical insurance as a taxable benefit and payroll giving to charity affect it.

Basically if I have a choice between paying tax at 40% or giving a donation to a few charities such as the Air Ambulance and Headway to keep me in the 20% bracket then I would rather still take home less cash but give the money to a worth cause than the taxman. And I suspect I need to do this before 1st April. I do have a payroll giving account already as I sponsor a very ugly monkey. (I don't mean Chris8886).

oi! there's no need for that sorta comment!! :smt076 lol

The most annoying thing this week is that I am now £15 per month poorer due to the increase in train fare since I just renewed my annual card, yet their services have been worse than ever.

well that's nothing new when it comes to train companies!!

on a serious note, try dropping my mum an e-mail, she might be able to help.

[Littlepeahead]

90 minutes tonight to get from Lord's to Barbican then a long walk in the rain to Liverpool St. Should take less than 30. And it costs me £4500 a year now. Grrrr.

[TamSV]

Anyone remember Statler and Waldorf on the muppets?

:D

If you put me and Tim on a balcony that's pretty much what you've got lol. :D

[Sir Trev]

If you put me and Tim on a balcony that's pretty much what you've got lol. :D

I've got some socks with them on. Every time I put them on now I'll think of you both!

[Biker Biggles]

If you have any savings with taxable interest that can get complex when you stray into the 40% bracket.These tend to have tax deducted at source,but only at the basic rate,so you end up owing a bit.