Employee Self-assessment -how can I reduce my tax bill

[DoKrus]

Hi,

I am an employee who in 2016/2017 and 2017/2018 earned over 100k. As it was due to the bonuses and my base salary was below 100k - I underpaid taxes. I own 6k for two years combined.

I am looking for advice if it would be possible for me to reduce the tax bill. I've never done self-assessment. My only income was my salary, and I worked for the same company for both years. I wasn't contributing anything to a pension. My charity donations and interest income were minimal.

I would be happy to hire an accountant if he/she could help me to make pay self-assessment more efficient.

Regards.

[AmanSood]

Hi,

I am an employee who in 2016/2017 and 2017/2018 earned over 100k. As it was due to the bonuses and my base salary was below 100k - I underpaid taxes. I own 6k for two years combined.

I am looking for advice if it would be possible for me to reduce the tax bill. I've never done self-assessment. My only income was my salary, and I worked for the same company for both years. I wasn't contributing anything to a pension. My charity donations and interest income were minimal.

I would be happy to hire an accountant if he/she could help me to make pay self-assessment more efficient.

Regards.

Hi DoKrus, definitely would recommend using an accountant/tax advisor to review your position in detail and advise you. Do feel free to get in touch and I'd be happy to have an initial chat to understand your circumstances in a bit more detail.

[someone]

It appears you've been caught out by the annual allowance tapering.

If so then you were effectively being taxed at 60% on some of your income.

Unfortunately, there probably isn't much you can do for these years now.

However, going forwards, if you expect your income to be over 100k (in total) then pension contributions can be very valuable.

Someone earning 120k will pay 12k of tax on that last 20k. So will only keep 8k of it. But pay that 20k into a pension (technically you pay in 16k and the pension fund will reclaim 4k tax) and you don't have to pay any of that 12k of tax. Depending on timings and tax codes you might get a big refund or you might pay less tax through the year.

Charitable giving can have the same effect - give 20K to charity and it only costs you 8k of your take home pay.

But beware if your employer already pays into your pension. There are limits to how much you can pay in and if you exceed them, you tie up the money until you can retire, you get no tax advantage at all, and you will have to pay more tax when you take your pension.

An accountant will be able to help with all the calculations. Pension contributions must be made in the tax year in question. If your bonus is variable and paid at the end of the tax year then this can leave you little time to get it all done so best to talk to an accountant well before the end of the tax year (and many are very busy in Jan too)