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Annual salary of £112200 plus approx. £20k in bonus. I make…

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annual salary of £112200 plus...
annual salary of £112200 plus approx. £20k in bonus. I make pension contributions of 5% and childcare vouchers of £124. Tax office just notified me of tax code for 2016/17 of K227. If I were to increase my pension contributions to 10%, would this "neutralise" the K227 tax code. What would my monthly salary be (excluding bonus) if this was the case? Need to bring home about £5k per month - thank you
Submitted: 2 years ago.Category: UK Tax
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2/12/2016
UK Tax Professional: bigduckontax, Accountant replied 2 years ago
bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 5,333
Experience: FCCA FCMA CGMA ACIS
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Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Please verify what you mean by 'Childcare Vouchers' and are they GBP 124 a week of a year?

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Customer reply replied 2 years ago
Childcare vouchers are a salary sacrifice scheme and are deducted form gross salary at £124 per month - they reduce my gross salary £1488 per annum
UK Tax Professional: bigduckontax, Accountant replied 2 years ago

Your income is 112.2K + 20K = 132.2K less 5% pension contribution 6.6K = 125.6K less 1.488 sacrifice leaves say 124K liable to tax. You loose your personal allowance at a pound for every two quid over 100K so you have no personal allowance. You could increase your pension contribution to up to 40K (the 15/16 limit) so a 13.2K contribution would reduce your income to say 112.5K and you would still loose half your personal allowance. You tax bill could be 31785 @ 20%, 6357 and the balance @ 40%, 38286, total 34643. Take that from 112500 leaves say 6488 GBP a month available, so your proposals are feasible.

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Customer reply replied 2 years ago
Thank you - confirms my thoughts. Shame I can't work part-time - would be better off
UK Tax Professional: bigduckontax, Accountant replied 2 years ago

Yes, they say you have to earn it to pay tax on it, but there comes a point, unless you are a Russian Oligarch or Donald Trump, when there doesn't seem much mileage in earning more! However, those of us who remember Dennis Healy and his 95% tax rates on unearned income, find the taxation climate quite mild these days. Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes!

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