Originally posted by tomtomagain
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Reply to: Legal Tax Mitigation - advice
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Previously on "Legal Tax Mitigation - advice"
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Originally posted by Eirikur View Post
I wish I had this "problem"
As stated by _V_ it's surprisingly easy to get close within a decade or two of saving. Over a 35 year working career easier still.
It's just something to be aware of. Not something to rule your life.
On a wider point, although minimising your tax is a sensible strategy, through a mix of ISA's, Pensions etc. But obsessively trying to get your tax rate to as low as possible can lead one down some dangerous paths ..... as the people on the "HMRC Scheme Enquiries" sub-forum will tell you.
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Originally posted by Crossroads View PostLet the tax tail wag the investment dog: VCT, EIS, SEIS...- Years 1-5 invest 10k into EIS/SEIS each year
- Years 1-5 reduce tax bill by 3k+
- After year 5, reinvest profitable previous investments (top-up if required) to continue reducing tax bill by 3k/year
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£40k invested every year at an average return (from stock growth, dividends and bond income) of 5% hits £1m after 15 years.
So pretty much going to hurt a lot of pension millionaire IT contractors.
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Originally posted by tomtomagain View Post
You need to avoid breaching the lifetime allowance, currently £1m + a bit, because once you do you will pay tax of 55% on anything over that. And you pay tax on your withdrawals as though they were income ( over the personal allowance ).
In short, pension tax is complicated, and certainly not the free ride that some people assume. I see it as tax-deferred rather than tax mitigated.
£1m might seem a very big number, very far away, but a few years of 40k contributions and, hopefully, reasonable growth will start sending you towards that number.
And of course, you have to hope that HMRC don't change the rules during your 30-year working life, which they have already done by slashing the lifetime allowance.
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Originally posted by shabak View Post
Thanks! This is actually very good advice! I dont need much money atm and indeed putting 40k in the pension will save me tax that will get wasted by this politicians anyway.
In short, pension tax is complicated, and certainly not the free ride that some people assume. I see it as tax-deferred rather than tax mitigated.
£1m might seem a very big number, very far away, but a few years of 40k contributions and, hopefully, reasonable growth will start sending you towards that number.
And of course, you have to hope that HMRC don't change the rules during your 30-year working life, which they have already done by slashing the lifetime allowance.
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Originally posted by shabak View Post
Thanks! This is actually very good advice! I dont need much money atm and indeed putting 40k in the pension will save me tax that will get wasted by this politicians anyway.
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Originally posted by mattster View PostPut as much as you can into your personal pension, even to the extent of living off savings if you happen to have some that aren't tax advantaged (i.e. not in an ISA).
You can put £40k a year in, and top up 3 years of lower payments as well. Depending on how old you are, you might not even have to wait too long to start getting it out.
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Put as much as you can into your personal pension, even to the extent of living off savings if you happen to have some that aren't tax advantaged (i.e. not in an ISA).
You can put £40k a year in, and top up 3 years of lower payments as well. Depending on how old you are, you might not even have to wait too long to start getting it out.
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Originally posted by shabak View PostHello: Is there any other legal tax mitigation allowance (beside pension) that you could recommend? Working for example Inside IR35 / Outside IR35 (Outside I know its expenses, electronics, subsistence etc).
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- Live in the Cayman Islands.
- If you listen to some of the advice on here you'd just earn less.
- Outside IR35 will have less tax, but it's not just inside or outside. They are different ways of working.
And be careful about the use of the word legal. There are plenty of perfectly legal activities that will look great at face value, but hurt in the long run.
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Legal Tax Mitigation - advice
Hello: Is there any other legal tax mitigation allowance (beside pension) that you could recommend? Working for example Inside IR35 / Outside IR35 (Outside I know its expenses, electronics, subsistence etc).
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