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.

Not if you only work for one employer ttbb.

If you only work for one employer via own company you will still have to pay deemed PAYE under the IR35 rules, and it will be your limited company (not end employer) responsible for accounting for it and paying HMRC. So not a good idea.

My take home is less than £40k per annum
Bless

I am a tax accountant.
I can think of some things you could do
but you'd have to pay me first

Snigger @Ta1kinPeece

I did have a similar thought earlier in the thread.

You could see if you can pay more into your work pension especially if the company increases their contribution too.

Alternatively, consider a SIPP (self invested pension). It comes out of gross salary so would be extremely tax efficient (although some of the tax would be paid back when you do your tax return as opposed to the employer sorting everything out). If you die, all the money will be inherited tax free. When you hit 55, you'll be allowed 25% of the pot tax free as a lump sum. That could help you with the mortgage or helping your daughter through uni. When you retire, you'll be able to either purchase an annuity or drawdown from the pot.

That's kind of in a nutshell so you'd need to read up on the detail or get an IFA. If you do it yourself, the Financial Times publish some useful books that explain the basics.

Ta1kingPeece & Kewcumber - stop being arses, you're not usually like this.

Thanks for all practical advice. Much appreciated.

You might be better off with an electric car? My friend leases a Nissan leg for 121 a month so she has no petrol or road tax costs

My simple opinion is that taxes are fixed and unfortunately for you (and me !) there is little we can do the reduce them

What is worth is analysisng spend as if you have not even looked I guarantee with a spreadsheet and a search you could cut costs by about 100 to 15O just by shopping around

I also am curious if you have looked as your work situation and the viability of taking in more respinsibility and getting a promotion

I worrry most about my pension and my SAHP tonne honest . I am halfway through my working life now and it worries me - as even with the mortgage paid off we will still be 1500+ Worse off

I would personally urge you to focus less on saving Tax and more on pension provisions tonne honest OP

sleepinghooty - you're wrong. A household becomes a net contributor to the state at around £40,000 (this article is a few years old, but the numbers won't be dramatically different: www.telegraph.co.uk/finance/personalfinance/tax/10638283/How-much-we-give-the-state-in-tax-and-how-much-we-get-back.html). The OP on their own has long passed that threshold.

45% at over £150k is hardly an incentive to better yourself

Indeed, that is why so many top rate tax payers are jacking it in to take on jobs as care assistants.

OP the fact is you are in the better off portion of earners hence a higher rate of tax on part of your earnings. If you want to reduce your tax contributions then you should have a decent pension plan and be putting money into it - you get more tax relief on pension contributions than someone on basic rate tax.

45% at over £150k is hardly an incentive to better yourself

Nor is the 62% marginal tax rate if you earn between £100k-£123k which is why lots of doctors and dentists have gone part time to bring their earnings down under £100k

It's not just the tax, higher earners often have higher costs, such as longer commutes, etc., so working "an extra shift" at weekends, if you're paying 62% tax and travel costs may actually mean you lose money!

Look at www.moneysavingexpert.com plenty of savings ideas. You want to pay your huge mortgage off before interest rates increase, so fix the rate or find a mortgage deal where you can over pay. Get a second job or rent a room out to fund the over payment. Pay more into pension. Car share or buy a more efficient car. Check all your outgoings and change to reduce. We all pay tax it's unavoidable! A few small changes may save you alot. Can you work from home for a couple of days?

the mortgage is fixed for five years and I want to overpay- hence me asking for ways to pay less tax. Honestly, I don't need to be told to shop at Lidl! Get a second job? When do I have the time for that and why would I bother as I'd be paying nearly 50% tax for the pleasure of stacking shelves in aforementioned Lidl!

Yes, you want to overpay the mortgage. But what's the point of doing it now? For example, you'll overpay by 6k now (so 10k out of your gross salary). That will save you about £90 in annual interest (at 1.5%). Instead of the 6k overpayment, you could shove 10k into your pension. In 5yrs, you'll be able to take out 25% so 2.5k to pay down the mortgage and still have 7.5k for retirement. You'll likely make more money than you'd save by overpaying the mortgage. Do you really want to forgo all the £££ to save the relative peanuts on mortgage interest? Also, you might be looking down at 'shop at Lidl' and have a cheaper car type of advice. However, by cutting your spending by £300/month, you'd accumulate 18k over 5 years. And even £30k if it's done out of gross salary through a pension.

So look at the basics instead of hoping for some miracle tax dodge that HMRC haven't cottoned on yet.

Fleetwood
Kew and I are not being arses

but you are pretty darned cheeky to want personalised tax planning on an internet forum for free, starting with a "poor me" post and describing your partner as "useless"

There are no magic tricks
taxes pay for the stuff that we take for granted

if you do not like them, move to a tax haven or join the millions of people who do not earn enough to pay tax

I'm not looking down at Lidl - I shop there!
The advice you're giving is exactly what I need - thank you. I don't need people who don't have the expertise I'm seeking, telling me to get a lodger!

How many children do have and what ages are they? What does your DP earn? Depending on the answers to those questions, you might be able to make some good savings in terms of pension contributions.

Ta1king - it's perfectly acceptable on an Internet forum like Mumsnet to ask for all kinds of advice. Others can ignore, offer a biscuit (so witty) or, if they wish, give some advice. As you say, there are things that can be done - I'm very grateful for suggestions about pension.

I didn't start off with a "poor me" post. In this country we tend to state our gross earning but really it's what lands in our bank account that matters. And, let's be honest, there are many of MN who would consider £55/58k a pittance.

And, let's be honest, there are many of MN who would consider £55/58k a pittance.

OP - talk to a decent accountant.

Paying tax is like a religion on MN. I and most of my friends who have decent incomes or incomes de various sources act to make sure I am paying as little as I legally have to. No point in throwing money away.

And, let's be honest, there are many of MN who would consider £55/58k a pittance.
But they are deluded.

see, Ta1king, you are being an arse.

I think everyone would like to pay less tax wouldn't they?

It's a chunk out of my wages I'd rather spend and I work bloody hard for the NHS so effectively I could be paying towards my own wages and I think I should be exempt (I'm not being serious obviously)

You earn, you pay tax. There are things we need to pay for as a society. You earn more, you pay more tax.

Allthelights - read the thread ....

Fleetwood
Getting snippy at me changes nothing of your situation.

You are on a salary that puts you in the top 25% of earners in the UK.
You are on PAYE so tax planning options are very limited.
The easiest way to reduce your tax bill is to defer a load of your income into a pension.
But that will not be much use for your DD at Uni or your "useless" DP.

I'm all for tax planning - its a major part of my income stream - but most tax planning is for people who do not get Employers pension contributions, holiday pay, sick pay and the security that PAYE folks get.