Legally Take Home 100% of your Earnings

[VectraMan]

I take home 1 million % of my earnings. 1 million %, 100%, 85%, 0%, infinity %, it's all the same amount.

Are we labouring the point?

[DonkeyRhubarb]

I'm pretty sure that pension contributions come out pre NICs as well, so the plan would work - assuming you can live on the peanuts.

I was thinking personal pension where you make contributions from your net income and then the pension Co claims the basic rate on your behalf, and you claim any 40% relief through your SA.

It's worth considering for anyone over 50 because you can extract 25% after 5 years.

Example

Pay in £30k/year.

Pension Company claims 20% tax back from HMRC, making it up to £37.5k.

You claim the other 20% back through your SA. (£12.5k p.a.)

Pension pot = 5*£37.5k = £187.5k

After 5 years, take out 25%*£187.5k = £46.8K tax free lump sum.

Total amount paid in = 5 * £30k = £150k

With 40% tax relief = £150k / 0.6 = £250k

[ASB]

I was thinking personal pension where you make contributions from your net income and then the pension Co claims the basic rate on your behalf, and you claim any 40% relief through your SA.

It's worth considering for anyone over 50 because you can extract 25% after 5 years.

Example

Pay in £30k/year.

Pension Company claims 20% tax back from HMRC, making it up to £37.5k.

You claim the other 20% back through your SA. (£12.5k p.a.)

Pension pot = 5*£37.5k = £187.5k

After 5 years, take out 25%*£187.5k = £46.8K tax free lump sum.

Total amount paid in = 5 * £30k = £150k

With 40% tax relief = £150k / 0.6 = £250k

Actually if you play your cards completely right with a limited and a working (but only "myco") spouse or partner and a stakeholder for them you can improve on that via immediate vesting and "de minimus" limits. You can get tax relief on 3600 of income going in that has never had tax paid on it (of any description). Not a viable strategy except for very limited circs though. Of course from a personal view I'd never ever do that. Except by by accident.

In terms of Lisa's original post this can potentially give > 100% retention.

ps. I **think** your example with higher rate relief is only valid if you have salary. Dividends aren't (or least for some time wern't) relevant income and you couldn't get higher rate relief - though this might have changed. It would be broadly valid if it was a salary sacrifice and the contributions were company. It's the NI that screws it up with personal contributions.

[rootsnall]

1. Become self-employed
2. Take earnings of say £5400 per annum so that you are below the tax threshold
3. Put all remaining income into a pension scheme.

I'm not far off this but can't quite convince myself it won't fire up Hector if I paid absolutely zip tax and NI next year. I also can't believe Hector won't quickly clamp down on this if more than a handful do it !? That is unless some rich and powerful party donors do it also, then it'll probably be OK.

TheFaQQer, you got me Sort of shows how easy it is to lure people into 'schemes'. I tell myself I'd never do it, but always have a sneaky read up when they are mentioned.

[krytonsheep]

I've managed to get a take home pay of 103% thanks to flat rate VAT, the bench and doing the accounts myself