Tax mitigation on going back to permie

[Kanye]

I have a few interesting open permie opportunities brewing, but the tax situation could be a bit of a blocker on this.

The situation is, I am in higher rate tax already this year (60k divis) and will also be in higher rate tax before I get started for all of next year (80k drctr loan to be converted into divi next year). This was all to fund a house purchase for cash.

If I go back to PAYE now, not only will that involve a pay cut, it will also mean that every penny I earn will effectively be higher rate taxed, some possibly at 45%.

I had one potential idea which was to do a pension salary sacrifice of around 90% of the permie salary (approx 90k), and dump that all into a SIPP which I'd put into the stock market or BTL (if I could stomach the latter). I don't need the money for the next few years due to retained profit in my LTD so this could work though I may regret one day locking that money away for 30 years. Any pitfalls on this one?

Does anyone have any other creative ideas? It seems difficult and risky to extract yourself from the LTD company setup unless you've had a few years of low dividends.

[Waldorf]

I have a few interesting open permie opportunities brewing, but the tax situation could be a bit of a blocker on this.

The situation is, I am in higher rate tax already this year (60k divis) and will also be in higher rate tax before I get started for all of next year (80k drctr loan to be converted into divi next year). This was all to fund a house purchase for cash.

If I go back to PAYE now, not only will that involve a pay cut, it will also mean that every penny I earn will effectively be higher rate taxed, some possibly at 45%.

I had one potential idea which was to do a pension salary sacrifice of around 90% of the permie salary (approx 90k), and dump that all into a SIPP which I'd put into the stock market or BTL (if I could stomach the latter). I don't need the money for the next few years due to retained profit in my LTD so this could work though I may regret one day locking that money away for 30 years. Any pitfalls on this one?

Does anyone have any other creative ideas? It seems difficult and risky to extract yourself from the LTD company setup unless you've had a few years of low dividends.

The highest tax rate is currently 52%, 50% tax and 2% nics, the 45% tax rate only comes in in April 2013.

Personally I am not a fan of pensions, be careful of being obsessed with saving tax at the risk of making a naff investment decision.

[BolshieBastard]

I have a few interesting open permie opportunities brewing, but the tax situation could be a bit of a blocker on this.

The situation is, I am in higher rate tax already this year (60k divis) and will also be in higher rate tax before I get started for all of next year (80k drctr loan to be converted into divi next year). This was all to fund a house purchase for cash.

If I go back to PAYE now, not only will that involve a pay cut, it will also mean that every penny I earn will effectively be higher rate taxed, some possibly at 45%.

I had one potential idea which was to do a pension salary sacrifice of around 90% of the permie salary (approx 90k), and dump that all into a SIPP which I'd put into the stock market or BTL (if I could stomach the latter). I don't need the money for the next few years due to retained profit in my LTD so this could work though I may regret one day locking that money away for 30 years. Any pitfalls on this one?

Does anyone have any other creative ideas? It seems difficult and risky to extract yourself from the LTD company setup unless you've had a few years of low dividends.

Surely you need to speak to your accountant?

In any event, even though you will be paying tax at a higher rate, you will be earning money which it seems you arent doing right now if I read your post correct. So, it seems to me your option is earn and pay tax (possibly higher rate depending what your accountant can advise) or earn nothing.

[SarahL2012]

I had one potential idea which was to do a pension salary sacrifice of around 90% of the permie salary (approx 90k), and dump that all into a SIPP which I'd put into the stock market or BTL (if I could stomach the latter).

Check with your accountant what the limit is on payments into pension funds. There's a relatively small cap on the amount you get tax relief on these days.

[Kanye]

Surely you need to speak to your accountant?

In any event, even though you will be paying tax at a higher rate, you will be earning money which it seems you arent doing right now if I read your post correct. So, it seems to me your option is earn and pay tax (possibly higher rate depending what your accountant can advise) or earn nothing.

I am currently in contract but bored as hell.

The contract market seems terrible - I'm finding it hard even get an interview despite having a pretty stellar CV if I do say so myself!

Loads of interesting permie opportunities out there though.

I would accept the pay cut to find interesting work, but the tax situation is killing this as an option it seems.