[CraigJPerry]

>> pushing over the £100k mark which here in the UK is a trap which means you pay 62% tax rate on every £ over 100k until £125k

Pension like you say is the obvious option, the other thing that may be useful is a salary sacrifice car scheme. If your employer doesn’t have a scheme, there are firms who offer turn key setup.

[MattPalmer1086]

Or salary sacrifice into the pension, to stay under or near 100k. Only disadvantage of salary sacrifice is it lowers your effective income if you want to apply for a mortgage.

[CraigJPerry]

Can you not just do additional voluntary contributions? I.e. max out your matched contributions then I’m thinking most schemes will allow you to avc into your pension as much as you like, no need for a sal sac agreement. There will be limits to how much you can avc, I don’t think they’ll care if you exceed the £60k/year but you will because that’ll blow your tax free limit. They’ll probably only care if you avc so much you put yourself below min wage.

I might be missing something though, there might be a benefit to sal sac pension I don’t know about, if there is I’m. Definitely all ears!

Sal sac car does mean your salary agreement is reduced so you’re right, would affect mortgage application or credit in general. AVC’s don’t impact your salary but obv they do reduce your take home which a mortgage application will ask for anyway so prob not much diff between.

I haven’t taken the sal sac car option yet but I’m seriously considering it.

[MattPalmer1086]

There is another difference. Because your effective salary is lower, the employer (and maybe employee) national insurance tax is also lower. Many companies pass some of that difference on too to the pension contribution.

[globular-toast]

I heard about this supposed downside, but it makes no sense to me. For a start, when I applied for a mortgage I was asked for gross income. I guess they trusted me to figure out the rest. But the main thing is you can just stop doing the salary sacrifice at any time. It's not like you're locked in for any amount of time.

[MattPalmer1086]

Yeah, you can just stop salary sacrifice if you need the bigger effective income. Although many companies lock you in to it on a yearly basis, so you have to plan ahead a bit.

Your gross (pre tax) income is exactly what has been reduced too. So if you are sacrificing 10%, your gross is 10% lower too.

[globular-toast]

> Your gross (pre tax) income is exactly what has been reduced too. So if you are sacrificing 10%, your gross is 10% lower too.

But it's not reduced, though, is it? If someone who isn't the tax office asks for my gross revenue I'll tell them what the gross amount that goes into my assets is. They don't ask "what's your gross income for tax purposes?"

[MattPalmer1086]

Ah, I think you are correct, my mistake. However, some lenders will take salary sacrifice into account when doing affordability checks, and won't lend as much. I guess if they don't ask, there's no problem.

[globular-toast]

Yeah, they can ask whatever they like, I guess. I wasn't asked specifically about salary sacrifice, but they did do an affordability check and that might have included pension contribution. I also checked with my employer that I wasn't "locked in" to anything and they could change my contribution at any time.

It might be different if the sacrifice is for something that's basically essential for you like a company car. I could see that getting more scrutiny.