To ask for ideas on how to pay less tax

[FleetwoodMacNCheese]

I earn £55k. Don't live in London. My take home is less than £40k per annum.

I've got a huge mortgage, long drive to work therefore spend a fortune on fuel. Is there a legal way I can reduce my tax as I really need to start saving for retirement. Could I ask for part of my salary to be paid in dividends as I've heard less tax is/NIC are paid on these?

Any ideas much appreciated.

Something useful you can do on MN is write down every penny you spend over a period, say 2 months, and then be brave enough to post the spend list on MN. People may spot savings opportunities you didn't consider (& will tell you about savings opportunities you don't see as useful, but still...)

I think pension would have to be salary sacrifice if it was to affect CB?
Although if you claim and then do a tax return you can include any charitable donations that you have gift aided and then 15% (I think) of the value is taken off what you owe back.
So you pay tax on any CB received over £50k, up to £60k whereby its not worth claiming. But you can claim, then do a tax return, and the amount you owe will be less than you claimed and will be reduced for tax on pension contributions plus any giftaid (including on donations to charity shops)

How can you earn that much and not have a pension? I employ one carer on low wage I still have to legally pay into a pension
For her.

Here's some actual financial advice:

Since you're posting on mumsnet, I'll assume you have at least one child.

Because you earn over £50k, the taxman claws back part of your child benefit. If you're happy to pay £5k (gross; so only £3k net) a year into your pension, your taxable income will be only £50k, and you'll get your full child benefit back. (This only works if your partner's income is also below £50k.)

If your children are enrolled in paid childcare (nursery, childminder, etc.) then you should register for Tax Free Childcare, which is worth up to £2,000 a year per child.

If you don't have children, and you're rattling around in a big house, consider taking in a lodger. Under the Rent-a-Room Scheme, the first £7,500 of rental earnings is tax-free.

I can't think of any other tax savings which don't involve either earning less or spending less.

Very few people are net contributors. You build up a fair defecit as soon as you are born. You will also be highly likely to get old, one day. Or you may become chronically ill or have an accident and become far more dependent on the state.

The pension is a no brainer on your salary. As for the rest, how the hell do you think people in your area on half your salary can afford their own socialist principles?

If you want to pay less tax to fund living beyond your means, then you're in the wrong place to garner sympathy.

why can't you move? use the train? carshare?
Is DP your DH- he needs to be to be able to transfer some of your allowance.
You can pay less tax by using pensions/shares etc- but this leaves you with less money in the short-term which is your concern from what you say. I second everyone saying go through your outgoings.

Organising your finances in order to minimise tax, based on the allowances which are offered by HMRC themselves is NOT tax avoidance or morally corrupt or any of the other drivel spouted here.

Does anyone really want to pay more tax than they have to because of some supposed moral obligation??? Even the Money Advice Service, funded by the FCA, a regulatory body, gives advice on how to reduce tax. I'm amazed so many see this as some awful immoral thing to do, and yet a poster can ask "will I get tax credits / benefits if I......?" It seems there is no shame in being entitled to take out of the system but an utter shame in being entitled not to put so much in.

OP. The first thing to do would be to check whether you have any salary sacrifice options open to you through your employer. Pension schemes, childcare vouchers, car and parking, work related training are often offered and if you take them up, it can reduce the amount of your taxable salary.

You can claim tax back on a whole bunch of work related things, fuel, clothing, expenses. It's worth having a look at HMRC and seeing if any of them apply.

You could also look at doing your own tax return. This way you can use all the offsets above but also gain advantage from things like interest on savings, charitable giving etc.

It might be worth looking at a financial adviser, but it may also be that the cost of that could outweigh any savings. Have a look and see what you can find on teh HMRC website first.

My wage slip says salary sacrifice, so this must be the compulsory pension.

Don't need more cash for day to day expenses - I want this mortgage paid off before fixed term ends (4.5 years) and interest rates rise. Also want to save money for DD going to university and me retiring.

Am not interested in ethical debate just now.

Contribute to a personal pension which will extend your tax bands and you will remain at 20% as you don't earn that much over the basic band and you will also not pay the clawback high income child benefit charge.

How much do you contribute and how much does your employer contribute to the pension, as a % of your salary?

Auto-enrolment contributions are due to increase to 8% by April 2019 and of that at least 3% must come from the employer, but some employers are already contributing at (or above this level) - so you might get a bit more in contributions from your employer in the next year or two if they're not already contributing at or above 3%.

Auto-enrolment schemes aren't necessarily crap - but check what the administration charges are on the scheme you're in. Auto-enrolment schemes are capped at admin charges of 0.75% - but there are lots of providers out there whose charges are less, so it eats into your pension fund less. It might be worth setting up a private pension if the charges on your auto-enrolment scheme are 0.75% (caveat, I'm not a financial advisor)

Is this auto-enrolment pension the first pension that you've ever had?? I hope not. The rule of thumb is that for a comfortable retirement you should contribute half the age you are when you start retirement and put this % amount aside pre-tax until you retire. So, if you started your pension at age 25, you should save 12.5% each year for your working life.

Sorry, that should have said: The rule of thumb is that for a comfortable retirement you should contribute half the age you are when you start saving for retirement and put this % amount aside pre-tax until you retire. So, if you started your pension at age 25, you should save 12.5% each year for your working life.

Hey people, those biscuits you're dishing out to OP, are they plain or chocolate covered? Cos chocolate covered biscuits attract more tax and that won't help will it?

Re. whether the bonus can be paid into the pension, ask your employer if you can 'bonus sacrifice'. This means you waive your bonus in return for a company contribution to the pension scheme - you will get tax relief (and it will also keep you below the £50K threshold to get child benefit).

If your employer doesn't know anything about bonus sacrifice, contact the pension provider - they usually have a form for this.

@Judashascomeintosomemoney ,

They're Jaffa Cakes. For tax purposes they are a cake, not a chocolate-covered biscuit; and thus incur less tax

Bizzy - don't have a pension at the moment (I know, I know)

Start one, you can pay in and although you won't pay less tax youe will get tax added to your contributions.

Hey people, those biscuits you're dishing out to OP, are they plain or chocolate covered? Cos chocolate covered biscuits attract more tax and that won't help will it?

Handing out Jaffa cakes

I think we'd all like to pay less tax OP but on a high salary, it comes with the territory surely? Shouldn't be a surprise

If your aim is to pay off your mortgage, change it to one where you can overpay - most building societies/banks offer this these days. Savings accounts that runs alongside your mortgage account are also out there. You can then dip into the savings or use to pay off the mortgage as it builds up

Thank you, Originalfoogirl - that's exactly what I'm trying to do.

I've always been against pensions because you were forced to buy an annuity but I understand things have changed. My parents worked from leaving school at 14, paid into pensions all their lives and died before they could enjoy them.

I need to provide retirement funds for me AND useless spouse so need something that won't die with me!

If you have an auto-enrolment pension, it won't die with you - if you die before you draw your pension, all the contributions that you and your employer have been made into the plan will be paid to your beneficiaries (so check that you've filled in the beneficiaries form - otherwise the scheme trustees have the right to decide who it all gets paid to).

If you die after you start your pension, whether it 'dies with you' will depend on what option you've chosen to draw your pension.

You really won't be a net contributor at that salary sorry. Quite a long way off, but it sounds like you don't care anyway

Pension.

Although I wonder how many of those yelling playground abuse voted for a party that were going to raise income tax.... (Also for a second eu referendum, which would be a perfect fit on mn)

50 and no pension? wow.....

You can't transfer personal allowance if you're a higher rate tax payer.

It isn't unheard of for employees to receive shares as part of an incentive scheme if your employers wish to do that.

It does have tax implications though so both you and they would be advised to talk it through with an accountant if they were willing to do so. It can be quite a complex area though and ultimately may not save you any tax at all, depending how it is set up.

I think you can salary sacrifice some salary to pay into a pension. Which achieves the 2 things you want to do. Save for a pension and save money in tax and NI. Salary sacrifices are how childcare vouchers and the bike to work scheme operate. You could investigate this?

Are you very valuable or critical to your company? Small businesses often set up share option schemes to retain key staff. If done correctly they can be very tax efficient too and will link your success to the success of the business. Might be worth asking?

Easiest was is to start your own company. Your employer pays company. You take out dividends. You can also claim partial tax relief on fuel costs this way. In terms of saving, when paying into certain schemes you can get money back from tax or tax free savings. Donating money to charity also lends tax relief so if you do donate make sure to include that on your tax return.