stevio
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Post by stevio on Mar 30, 2016 12:00:07 GMT
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ilmoro
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Post by ilmoro on Mar 30, 2016 12:43:34 GMT
Personal allowance is 11k for 16/17. I was under the impression that Savings Starting Rate Band was being abolished with the new PSA but it would appear not, at least next year.
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james
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Post by james on Mar 30, 2016 18:46:22 GMT
Pensions count.
A person who is taking income from a personal pension can do things like taking three times as much in one year then nothing for two years to get two years of the savings allowance. Cap the three times at basic rate income tax only, perhaps, floor in all three years at the income tax personal allowance. And do VCT buying to eliminate the income tax in the year when taking the three times income.
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stevio
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Post by stevio on Mar 30, 2016 19:34:26 GMT
How does this work with salary sacrifice james ? I imagine you could bring it down to below the personal allowance and get the benefits to savings tax rates
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james
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Post by james on Mar 30, 2016 22:41:49 GMT
If you're working part time that's doable.
If working full time the minimum wage prevents you from cutting your income to the personal allowance. It's illegal for an employer to pay less than minimum wage and that includes via salary sacrifice.
Benefits in kind can also be an issue.
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Investboy
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Post by Investboy on Mar 31, 2016 8:56:29 GMT
"tax help for older people"? And what about "younger" ones that still work? Is it applicable?
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james
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Post by james on Mar 31, 2016 10:10:50 GMT
"tax help for older people"? And what about "younger" ones that still work? Is it applicable? Salary sacrifice is available to younger people, yes. The main catch is that salary sacrifice is usually into a pension and the pension pot isn't available until age 55 so it's more appropriate for those fairly close to that age to cut their pay to low levels. Younger people can buy some VCTs and get 30% income tax relief capped at income actually paid then five years later sell those VCT shares and buy something else or wait six months (I forget the exact gap required) and do it again. 30% once every five years for longer than an older person can do it and often some tax exempt dividend income as well. That's a lot of income tax saving potential if VCTs are suitable as an investment and if you have enough money to defer income for five years which is effectively what you're doing. Why pay income tax when instead you can save aggressively until you have accumulated enough money to stop paying it? Older people can do this as well but they have fewer years to live to do it. Older people who are 55 or older can do things like paying £2880 into a pension, having basic rate tax added (even if not paying any income tax) then taking out the gross £3,600. 25% tax free lump sum and the remaining 7% taxable income. If taxed at basic rate that's £900 + £2,700 * 0.8 = £3,060 out a net gain of £180. Or if not actually paying tax because it's within the personal allowance, a net gain of £720. Can be done every year until reaching age 75. As soon as any taxable part of any pension is taken including this the annual allowance for pension contributions is reduced to £10,000. £3,600 is the amount anyone can pay in even if it's above earned income, if earned income is higher that can be paid in instead.
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stevio
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Post by stevio on Mar 31, 2016 10:25:14 GMT
If you're working part time that's doable. If working full time the minimum wage prevents you from cutting your income to the personal allowance. It's illegal for an employer to pay less than minimum wage and that includes via salary sacrifice. Benefits in kind can also be an issue. As directors of ltd's are exempt from the minimum wage and can adjust their salary accordingly, structuring their salary and interest to take advantage of this could give you a good benefit. You can still maintain the minimum salary for NI contributions I realize the Savings Starting Rate Band has been there for a while, but this has now grown by £1000 with the Personal Savings Allowance to give a potential £6k in interest to be earned tax free. Potentially your spouse could do this also.
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ablender
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Post by ablender on Mar 31, 2016 16:32:43 GMT
What is "Savings Starting Rate Band"?
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stevio
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Post by stevio on Mar 31, 2016 16:35:39 GMT
What is "Savings Starting Rate Band"? It might be a phrase I have just made up! but here I am referring to the existing £5000 allowance for savings at 0% IT, as a distinction from the new £1000 Personal Savings Allowance
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pikestaff
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Post by pikestaff on Mar 31, 2016 17:56:09 GMT
Older people who are 55 or older can do things like paying £2880 into a pension, having basic rate tax added (even if not paying any income tax) then taking out the gross £3,600. 25% tax free lump sum and the remaining 7% taxable income. If taxed at basic rate that's £900 + £2,700 * 0.8 = £3,060 out a net gain of £180. Or if not actually paying tax because it's within the personal allowance, a net gain of £720. Can be done every year until reaching age 75. As soon as any taxable part of any pension is taken including this the annual allowance for pension contributions is reduced to £10,000. £3,600 is the amount anyone can pay in even if it's above earned income, if earned income is higher that can be paid in instead. Isn't this recycling subject to anti-avoidance rules, albeit that they appear not to be currently enforced?
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ablender
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Post by ablender on Mar 31, 2016 18:03:06 GMT
What is "Savings Starting Rate Band"? It might be a phrase I have just made up! but here I am referring to the existing £5000 allowance for savings at 0% IT, as a distinction from the new £1000 Personal Savings Allowance How is it accessed?
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ilmoro
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Post by ilmoro on Mar 31, 2016 19:35:14 GMT
It might be a phrase I have just made up! but here I am referring to the existing £5000 allowance for savings at 0% IT, as a distinction from the new £1000 Personal Savings Allowance How is it accessed? In 2015-16 Basically if your income from non-savings (employment, pensions, benefits, S&S investments) plus £5k was less than £15600 then you could register for tax free interest. If you income from non- savings plus income from savings was more than £15600 but your income from non-savings is less than £15600 then you could claim some or all of the tax taken for your savings income www.gov.uk/…est-on-savings/tax-free-savingsWith examples www.thisismoney.co.uk/money/news/article-2978131For 2016-17 this increases to £16k as the Personal Allowance is increasing. On top of this everyone on basic rate doesnt pay tax on first £1000 of interest from savings, £500 for higher rate. As savings interest will be paid gross you dont need to register anymore Interest will be paid gross so it will be assessed either through tax return or from info provided by employers (real time) and financial institutions (periodic returns) and I assume collected through tax code adjustment the following year (or direct payment/refund). Been quite a lot of noise about HMRC sending out tax codes estimating peoples interest which may lead to too much tax being taken if income/interest returns have fallen. Everyone will have access to their tax info through HMRC site and can amend it online (Everyone should check this for accuracy, it also includes NI contributions towards state pensions - Ive just found HMRC havent counted a full year) Sign up for HMRC Personal Gateway here www.tax.service.gov.uk/coafe/government-gateway/register?accountType=individual&continue=%2Fpersonal-account%2Fdo-uplift. You need a mobile for security (i think), NI number and some financial details (eg recent NI & tax paid so they can verify you) Sure pikestaff or james can correct/improve on this
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james
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Post by james on Apr 1, 2016 0:24:37 GMT
Older people who are 55 or older can do things like paying £2880 into a pension, having basic rate tax added (even if not paying any income tax) then taking out the gross £3,600. 25% tax free lump sum and the remaining 7% taxable income. If taxed at basic rate that's £900 + £2,700 * 0.8 = £3,060 out a net gain of £180. Or if not actually paying tax because it's within the personal allowance, a net gain of £720. Can be done every year until reaching age 75. As soon as any taxable part of any pension is taken including this the annual allowance for pension contributions is reduced to £10,000. £3,600 is the amount anyone can pay in even if it's above earned income, if earned income is higher that can be paid in instead. Isn't this recycling subject to anti-avoidance rules, albeit that they appear not to be currently enforced? There are several conditions that must all be met for the anti-recycling rule in PTM133810 to be triggered. One of them is that the value of all tax free lump sums taken within a twelve month rolling period exceeds £7,500. That isn't the case with what I described. Once the 10k limit is triggered this activity can never exceed that threshold, though other lump sums being taken could go over it. If an initial larger withdrawing is done another of the rules is that the increase in pension contributions attributable to recycling of pension lump sums over a five year cumulative period centered on the tax year in which it is taken must exceed 30% of the lump sum value taken. If a person was contributing £10k a year in the third tax year before taking the lump sum and had been doing so regularly there would be no increase so this condition would not be met. This is Money has some more commentary on this.
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jimc99
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Post by jimc99 on Apr 1, 2016 0:57:56 GMT
Also useful is the £1000 tax allowance that for couples can be transferred from the non tax payer to the tax payer each year. This is Money has the info.
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