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  • Tax

    Reduce Sec 24 Liability via AVC payments

    Ok, I'm with you on that,  but Andy said:

    I am considering paying a much larger proportion of my salary from employment into their company AVC scheme to reduce my overall tax thresholds, especially in view of the increasing Sec 24 related liabilities.

    So he'll pay less tax on his EMPLOYMENT income.

    But how will this reduce his 24 obligations?

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    It doesn’t and if you read his comments he acknowledges that it’s reducing his overall tax liability and he will be looking to reduce his mortgages to reduce his S24 liability.

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    If salary sacrifice is used then it would affect his gross income for tax purposes  and could help avoid S24.

    If total income is 55k with mortgage interest of 10k you would pay an extra 2k tax because of S24.

    If you yourself pay 6k into a pension tax relief would make it up to 10k but you woud still be paying for S24.

    If you use salary sacrifice for 10k you wouldn't get tax relief, but you wouldn't pay tax on it so it would work out the same for the pension. But you total income for tax purposes would be £45k so you wouldn't be affected by S24.

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    I agree in the example you quote.  The previous poster was questioning it for the OP as it appears his income is at a level where he will remain a higher rate tax payer after the pension contribution and as such no direct saving on S24 but reduced tax due to pension contribution.

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    Ok gotcha,  yep we're on the same page.

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