Did you know that once you earn more than 100,000 per year, you will need to begin filing your self assessment tax returns with the HMRC.
This is because you are classified as a high earner, and most high earners have more complexities, such as multiple sources of income and the loss of your personal allowance. Therefore, HMRC wants to take a closer look at your income to ensure it is all accounted for and that the correct amount of tax is being collected. It does this by assessing your adjusted net earnings.
What are adjusted net earnings? This is how HMRC calculates your tax. Details on how this is calculated can be found by clicking HERE
A key thing to note is that your personal allowance is normally reduced by £1 for every £2 over 100k of adjusted net earnings.
As your pension contributions impact your adjusted net income, increasing contributions into your pension could result in tax savings whilst simultaneously helping you build financial security for retirement.
A pension contribution for people earning between £100,000 and £125,140 gives an effective tax relief rate of 60%!
Using salary exchange/salary sacrifice for your pension contribution increases this effective tax relief rate to 67%!
Speak to a Financial Adviser to help you optimise your income, save tax efficiently and plan for retirement.