Firstly, just want to confirm that the effective 60% tax bracket where
your personal allowance is eroded starts next tax year, not this tax
year?

Also, if you make pension contributions into a SIPP sufficient to keep
your taxable income below 100K, will that avoid having to pay this band
of tax? I've found an article in the Times that talks about using salary
sacrifice to do this but I'm not sure about just making pension
contributions.

Assuming that using a pension can avoid this tax bracket, presumably
there is no problem with making a lump sum payment right at the end of
the tax year when you have a much better idea of your taxable income for
the tax year? (I'd assume this is ok but I wouldn't be completely
surprised if there's some regulation somewhere that says lump sum
payments made into a pension in March are treated specially)

Thanks,

Tim.


--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://www.woodall.me.uk/

On Thu, 25 Feb 2010 20:51:24 +0000 (UTC),
Tim Woodall wrote:

I found this:
http://www.olswang.com/budget09/Budg...-_Pensions.pdf

It's VERY complicated :-(

Firstly, just want to confirm that the effective 60% tax bracket where
your personal allowance is eroded starts next tax year, not this tax
year?

Correct.

Also, if you make pension contributions into a SIPP sufficient to keep
your taxable income below 100K, will that avoid having to pay this band
of tax? I've found an article in the Times that talks about using salary
sacrifice to do this but I'm not sure about just making pension
contributions.


yes but...

Assuming that using a pension can avoid this tax bracket, presumably
there is no problem with making a lump sum payment right at the end of
the tax year when you have a much better idea of your taxable income for
the tax year? (I'd assume this is ok but I wouldn't be completely
surprised if there's some regulation somewhere that says lump sum
payments made into a pension in March are treated specially)


Depends. But IIUC provided you earn under 150K then there is no issue.


It looks very much to me that for people earning over 150K there will be
little to no point paying into a pension going forward unless they've
been paying in already. And even for people paying in already there will
be no scope to increase payments.

They'll only get 20% tax relief going in and they'll be highly likely to
be taxed at 40% when it comes out again.

It also looks like if someone is expecting to earn over 150K for the
first time in the next tax year then they'd be advised to pay in a large
lump sum into their pension this year rather than increase their
contributions in future years.

Tim.

--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://www.woodall.me.uk/

"Tim Woodall" wrote in message
e.uk...
On Thu, 25 Feb 2010 20:51:24 +0000 (UTC),
Tim Woodall wrote:

I found this:
http://www.olswang.com/budget09/Budg...-_Pensions.pdf

It's VERY complicated :-(

I think this claw back of allowances is a stupid route for the tax system to
be going down.

It's effect is exactly the same as increasing the "top" rate of tax by a
couple of percent, except that it's unfair as it imposes a marginal rate
that is actually more than that for a small number of people.

If the tax system wants to impose a higher top rate it should do so, but at
least make sure that it implements it fairly IMHO

tim

On Fri, 26 Feb 2010 14:17:57 -0000,
tim.... wrote:

"Tim Woodall" wrote in message
e.uk...
On Thu, 25 Feb 2010 20:51:24 +0000 (UTC),
Tim Woodall wrote:

I found this:
http://www.olswang.com/budget09/Budg...-_Pensions.pdf

It's VERY complicated :-(

I think this claw back of allowances is a stupid route for the tax system to
be going down.

It's rather clever :-( The 100K theshold will not increase so over time
more and more people will lose the personal allowance. And the personal
allowance can be increased without giving anything to the top earners.

It's effect is exactly the same as increasing the "top" rate of tax by a
couple of percent, except that it's unfair as it imposes a marginal rate
that is actually more than that for a small number of people.

I agree.

If the tax system wants to impose a higher top rate it should do so, but at
least make sure that it implements it fairly IMHO

Although I think the NI and HRT limits are the same now, we've had a
similar unfairness at that earnings level for many years where people
earning more paid a lower rate of tax. I don't think "fair" has ever
been a feature of the tax system.

Tim.

--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://www.woodall.me.uk/

On Sat, 27 Feb 2010 07:56:49 +0000,
Postman Pat wrote:
This suggests that somebody earning 150k gross and saving into a
SIPP should make a big contribution (£20k max) into their SIPP before
5th April - is that correct?
I believe so.

If they will earn over 150K for the first time this year then it might
even make sense to make a charitable donation to reduce their gross
below 150K and then pay in more than 20K.

I think it's possible to backdate charitable donations so they might be
able to reduce last years income below 150K too.

Assuming I'm doing the sums right, I think for anyone earning over 180K
the effective tax rate on pension contributions will be 37.5%. Even if
they are only taxed at basic rate on the way out and get 25% tax free I
think that works out at 46.9% tax overall compared to 50% and having the
money available whenever they want it. And there's always the chance
that by the time they get to take their pension there might no longer be
a tax free lump sum.

Tim.

--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://www.woodall.me.uk/

On Sat, 27 Feb 2010 16:47:57 +0000,
Postman Pat wrote:

The bottom line seems to be that 150k earners are far better off
stuffing money into ISAs. [rather than pensions]

IMO it's almost always preferable to use ISAs over a pension fund. The
recent changes will mean for the very top earners it will be better to
use a normal savings and investments scheme than a pension.

Tim.

--
God said, "div D = rho, div B = 0, curl E = - @B/@t, curl H = J + @D/@t,"
and there was light.

http://www.woodall.me.uk/