Salary bands with tax vs benefits

[Totupthenumberspls]

Asking here because I guess someone has done the numbers….
When earning around the 100k mark, at what point does it become beneficial to drop hours to gain childcare allowances etc vs what salary do you need to achieve to offset these benefits?

Says who?

I took an electric car through my employer which was taken off my gross earnings to bring it down. Also cheaper to have a lovely car!

And they say people on benefits are entitled.

@Jovacknockowitch
Call it a hunch based on what they've said...
Labour vocally pushed back hard on 2023/24 annual allowance increase from £40k to £60k and the removal of the £1.07m lifetime allowance.
So let's not be totally surprised if they try to reform this if they get into power.
It's shortsighted and popularist to penalise high earners.
The top 10% of taxpayers paid 60% of all income tax in 2023–24.
The share of income tax revenue contributed by the top 1% of taxpayers rose to 29% in 2023–24.
They carry the broadest load tipping in the majority of the national tax pot that benefits everybody. Taking potshots at them is naive tall poppy syndrome. Go hard on them and don't be surprised when they cut back their hours, productivity and wealth creation, maybe scale back their business and employ fewer people, decide to semi retire or take an easier lower paid job. And the overall tax pot declines disproportionately hard which has a detrimental impact on everybody and all public services.

Labour has pledged to reverse plans to abolish the lifetime pensions allowance if it wins power, calling it "a Tory tax cut for the rich"
news.sky.com/story/amp/labour-to-oppose-removing-lifetime-pensions-allowance-calling-it-a-tax-cut-for-the-rich-12834963
ifs.org.uk/taxlab/taxlab-taxes-explained/income-tax-explained#:~:text=The%20top%2010%25%20of%20taxpayers,10%20years%20of%20that%20period.

Links attached if you fancy a read in more depth.

I think you need to look up the meaning of entitled. You are confusing keeping more of the money you earned vs wanting to have more of other people’s money. There is a difference.

I support fair taxation. This isn’t fair.

Can you explain how you’d define fair taxation? Because I’m not convinced paying 60% tax and seeing literally nothing for it is exactly fair, nor is it an incentive to work harder.

When you’re looking to reduce your gross yearly income to below 100k using salary sacrifice, also remember to take into account any bonus or share payments that will bump you over the 100k threshold. A tax return will be required too if you earn 100k plus

I believe the 60k total includes total contributions by you and your employer, so just checking you don’t just mean your own contributions. Eg your employer puts another 5% you’ll go over your annual allowance (but you can use some from previous years if you have maxed out previous allowances)

How I wish this was a problem I was contemplating today…

*haven’t maxed out previous allowances

Labour have said they’ll bring back the lifetime allowance. They haven’t said at what level. But in saying that they’ve either misunderstood why it was removed (to appease the doctors, the only profession left which is unionised and with a final salary pension), or actively want to inflict more pain on the NHS.

Up to £100k you pay 40% tax
If you earn a penny over it's the highest marginal tax rate of anyone: not only do you pay effectively 60% tax on each £1 due to losing personal allowance, you also lose all your childcare benefits. And I know that's the whole point of this thread, but that's what is not fair.
Tax avoidance is very fair and legal, and entirely sensible in this situation.

The effective tax rate on the first £1 over £100k is around 5000% for one child. It's madness.

Someone could get a payrise taking them over £100k and be significantly worse off. The £100k was introduced years ago and has not increased with inflation, it should be nearing £150k by now. More and more people are being pulled into it each year.

This is not the place to be sniping at people asking very sensible questions about basic tax planning.

Thanks for your valuable thread contribution, most insightful helping the OP with the original question 👍

Has anyone any experience with this company?

It also depends on whether you are a two parent household or one parent because a two parent household is taxed far less on the same household income so the system massively penalises single parents with them losing their personal allowance and tax free childcare at half of the household earnings that a two parent family could earn before they lose these things (if they both work) and needing far more childcare than a two parent household because they can't have a SAHP, or juggle working hours and school runs and holidays between them by starting earlier/ later and having twice the available annual leave.

I ran the sums and as a single parent with two children in childcare you'd need to earn £150k in most cases to get back to the same net income you have at £99k, because of the cliff edge with tax free childcare and 30hrs being withdrawn. The marginal tax rate for earning anything over the £100k threshold can shoot up to - not a typo - 40,000%!!

That is an insane tax system. Indefensible and has been shown by economic research again and again to be a key driver of the woeful UK productivity, the same as the cliff edges created by the withdrawal of child benefit and the ridiculously high universal credit taper rate. At all levels, our tax system harms the economy for us all as well as individual living standards when people get caught in these traps.

If Governments implement illogical and unfair systems then it's absolutely fair and understandable and reasonable for people put in that situation to try to find ways to avoid beign caught in these traps, within the law. The economic research shows that most people at risk of breaching these thresholds either cut their working hours or put the money over the threshold into pensions. At least it means there'll be less pressure on the state to fund the many, many people who haven't adequately provided for their retirements, I guess.

Also depressing to learn was that in my circumstances (me physically disabled, two children also with significant disabilities) we would be better off if I had never bothered to work or study at all: rent paid, no childcare cost, and £3500 per month after that to live off per the usual benefit calculators quoted on here. I think many people have no concept of what it takes to earn the kind of salary to fund that kind of disposable income after rent and childcare, as a lone parent. Whereas with our mortgage and me working full time and said disabled children needing expensive nannies not group childcare, my supposedly "rich" six figure incomes once it has been taxed and paid the mortgage on a modest home and the childcare bill leaves us much poorer than if I'd never bothered to work at all. And my children get far less of my time because I am always working, and my health deteriorates further because I'm doing way too much. But no help for us, to make it sustainable, despite what I pay in and have paid in for decades. It feels like a massive kick in the teeth and before anyone trots out the tripe about "why don't you just go on benefits then?" the answer is we couldn't now even if I was that way inclined as I'd be deemed to have made us intentionally jobless and homeless and "deprived us of capital" if I quit my job and sold my house and spent the equity I have built up through this superhuman effort while working when chronically ill and caring for two disabled kids alone. So that isn't even an option.

While people who need help should get it and I've always been more than happy to pay for that it that should include everyone, including those who fund the system for everyone else, otherwise the system will lose all support and gradually be eroded, as you can see happening in the UK. People always say they want Scandinavian models of services and tax but what they don't realise is higher PAYE earners in the UK pay some of the highest tax rates in the world. The different in Scandinavian models - and those in lost of western Europe - is that average earners pay far more and the tax base hasn't been narrowed so much with a huge personal allowance so that many pay nothing and over 50% of people pay less in over a lifetime than they take out in services and benefits. That is not sustainable for social cohesion or functioning services or a healthy economy. And these totally penal marginal tax rates at all levels (UC taper rate, withdrawal of child benefit at £50k, withdrawal of PA/ childcare at £100k) are a symptom of that. Ironically all have been shown to actually REDUCE overall tax revenue, so don't even make economic sense.

Nothing will improve significantly in terms of standards of living in the UK until the tax system is reformed IMO. There are many other issues as well, of course. But this is one key strand of the immensely damaging economic mismanagement and chickens are coming home to roost.

@Tryingtokeepcalmandcarryon
Yeah you're right, the £60k pension allowance is total funds, so it's what you put in and any employer contributions.

Same, and more to the point it's also stupid. There's always someone who starts talking about benefits and low incomes when this subject comes up, but people are making calculations like this all over the income spectrum.