Recently doubled my income - do you use an accountant, financial advisor? Do they help?

[MoneyHelpPl]

Recently, I more than tripled, my income. I was lucky. This tax year I'll take home £205k. Next tax year will likely be lower, due to two big bonuses. I pay a lot in childcare.

My financial situation has changed so drastically, it has left me wondering whether I should be being smarter with investments, pension, costs and taxes etc?

I might only be paid at this level for a few years, so want to make the most of it. I know lots of it will go on tax and childcare. So perhaps there are legitimate ways that I could be using to be smart.

Has an accountant or financial advisor helped you? I imagine there are others who have a lot more experience.

I think I know about the basics, like 1) an ISA is a good idea 2) Pensions are somewhat tax efficient. 3) No support for childcare at this income level (which makes sense). Although, not long ago my childcare bill would have been much lower. Anything I'm missing?

Oops title says doubled income, post says trippled. To be clearer, my base doubled but bonus this year takes it much higher

I think IFAs can be helpful sometimes but it really depends on what you need to know. If it's simple you can save money by just doing it yourself. First questions- how much money are you going to have to save/invest (so, what you earn, net of tax, less your expenses)? What do you currently have in the way of pension and savings? Do you have any specific goals eg retire at X age, saving for a house, pay off mortgage early, wedding etc?

Do you own your own house outright, because the security this gives is price less I would advise a normal sized house rather than a mansion😀
then maximise pension contributions, you will need advice on this as the life time allowance is utterly confusing.
then a couple of years living expenses in an easy access savings account or premium bonds
then consider a cash isa for this year for some more easy access money, set aside for a new car in due course, or as a holiday fund
then look at investing, and this again is where advice may be helpful

if this income is truly only for a short time, then make your future as comfortable as possible. Don’t blow it all now on a massive house, top,of the range car and diamonds

No.1 priority is your pension as the most tax efficient savings vehicle.

I personally wouldn't pay off mortgage if you have one. I'd prioritise investing.

It's a high income and well done, you've done well. But IMO not so high to justify professional advice fees. There's lots of free financial education out there. It's worth educating yourself as it's a skill for life which will always be useful.

Look at meaningful money on YouTube for starters.

100% buy Ramit Sethi - I will teach you to be Rich (make sure you get the U.K. and not US version).

He also has a podcast and a new Netflix show (the title sounds really scammy 🤣🤣 but it’s not and a lot of his stuff is available for free - no having to join cults and stuff 🙃).

But yep a Vanguard E.g target retirement fund, ISA, maximise pension, automate outgoings, invest in what you love (your rich life) but cut back on the things that you don’t.

We used to have an account when we had a “partnership” but we simplified stuff and changed to employment (so with the help of Ramit) now we don’t have an account/advisor and it’s not worth paying someone for that imo.

We did pay off our mortgage, but it was a slightly different scenario (private so no interest really) and we do own a smaller home than you would expect for our income bracket. This means that we have that security and peace of mind and can afford to E.g quit work and move on if we wanted.

We have completely maximised our savings portfolio and have got our wonga working hard for us.

Be careful with pensions at that level of income or you might get hit with pension taper charges

You need to do a tax return so get an accountant

As you say your earnings will go down in a few years, I think number one priority is to not let your spending creep up too much. It's easy to spend what you earn, and when your earnings fall you will struggle.

Don't get a gigantic mortgage based on this salary!

The recommendation above for the meaningful money website/ YouTube/ podcast is good. I would educate yourself rather than pay an IFA.

Good things to do

• use your ISA allowance each year (and your spouse if you are married). Stocks and shares for long term, cash for short term
• have an 'emergency fund' in a savings account- moneysavingexpert has info on savings accounts and which have the best interest rates
• putting money into your pension is tax efficient, but you can't access the money until a certain age. Look at the rules for how much you can pay in per year as a high earner (meaningful money has videos on this). You can set up a SIPP (self invested person pension) or sometimes pay into your workplace scheme. If you don't know what to do with your earnings, pension is generally a good place if you won't need it until retirement age
• look at where your stocks and shares ISAs and pension are invested. Look into passive index tracker funds for long term investments e.g. vanguard funds

Paying off your mortgage - personal decision- the emotional benefit of being mortgage free (or having a small mortgage) can be huge. You do need to look at your fix and any eaely repayment fees.

If £205k is your take home (ie net of tax) then your ability to take advantage of pensions investment is going to be very constrained - https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

In my limited experience so far, the best use of paid advisors is when you have a specific question in need of an answer. Educating yourself to the point of being able to formulate any questions that relate to your specific situation is a great first step.

I agree with those who have touched on pensions / annual allowance as being an issue for you - and in fact I would specifically say that is a question worth finding an appropriate advisor to discuss. With a recent increase in income you may well have "carry forward" of annual allowance, and the way the taper is calculated is complicated. A personalised examination of your situation may help you optimise pension contributions and avoid excess taxation, there could be crazy possibilities like putting more into your pension this year and very little next year being better than putting similar amounts in both years, for example (I'm guessing big time from some of the stuff I've read in the past).

For that question, I think an accountant with tax expertise would be your best bet - but need to ask around and have confidence that you are paying someone who truly knows how it works.

I have an accountant because I contract through a limited company. I find it useful to delegate all the paperwork to - if you're PAYE you don't need that.

This year I also took the advice of a Financial Adviser, because like you I had a bit of a bonus windfall, and wanted to figure out what to do with it - so now I also have a much boosted pension as that was the most tax efficient thing to do with it.

In your case, yes, a chat with a financial advisor would be a good plan. Each year I do a checkup with my accountant (and the FA now as well) - Paid off house, government pension, private pension, cash savings, secondary income stream are the 5 things we check on in order to be ready for retirement.

My income is much lower but I have a decent inheritance invested. I have an accountant who does my tax return every year and an IFA who does everything else. when looking for an IFA, I specifically went for one who does 'everything' and who charges one fixed up-front fee each year (no commission from selling me specific products, no extra charges). it might be a bit more expensive up front but I know that he works only for me and does what I want.

found him on https://www.unbiased.co.uk/ and then some phone calls to find someone who is not pushy and has the same investment strategy as me.