October 30, 2025 • 13 mins
Tax. It’s something we all pay, but few of us truly understand much about this large deduction from our earnings. In this first of two bite-sized episodes, our host Iona Bain sits down with accountant and finance content creator Tim Paul to shed some light on how it works.
Tim explains how you can reduce your tax bill through clever tools like salary sacrifice and pension contributions, putting more of your hard-earned money to good use while still playing by the rules.
If you’ve ever wondered whether you making the most of tax-free benefits through your employer, this episode will leave you feeling a little bit richer and a lot more tax-savvy.
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You can play the podcast and find other useful content on L&G’s website:
https://www.legalandgeneral.com/podcasts/a-little-bit-richer
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Iona and her guests share their own personal thoughts and opinions in this podcast. These might be different from L&G’s take on things. They give financial guidance for a UK audience that’s relevant at the time of recording. It’s general best practice, not the kind of personalised advice you’d get from a financial adviser.
The information in this episode is correct when published in October 2025. However if you’re listening at a later date, please double check as there may have been changes.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This series is brought to you by L& G, helping
you build a future that's a little bit richer.
Iona Bain (00:06):
Hello and welcome to A Little Bit Richer, with me,
Iona Bain, brought to you by Legal & General. Now today
we're focusing on tax, something that gets taken before you're
paid, so we don't think about it too often, but
maybe you've seen videos online or heard stuff from friends
about ways you can reduce the amount of money the HMRC
gets from you. And you might be wondering, is that
(00:27):
complicated? What's the catch? Where do I start? Well, we've
enlisted someone who is definitely going to help us understand
this whole area, and that is tax advisor Tim Paul.
He's actually joining us for a special two- part episode.
Tim is a certified accountant, social media finance content creator,
and is the co- founder of his own accountancy practice,
(00:49):
so I think he knows a thing or two about
tax. He's going to enlighten us on ways you can
reduce the tax you pay while improving your longer- term
finances all in a way that is perfectly legal. This is
going to be an interesting one. Welcome, Tim.
Tim Paul (01:05):
Thank you. I love that intro. It makes me sound
really qualified. Great.
Iona Bain (01:09):
Well, you've got a lot to live up to now.
Tim Paul (01:11):
Exactly.
Iona Bain (01:12):
Can you just give us a very brief overview of
how salaries are taxed in the UK, what the different
tax thresholds and tax bands are? Just talk us through it.
Tim Paul (01:23):
In the UK, we run on a marginal tax system,
which, the more you earn, the more you get taxed. Right at the start,
you've got your 12,570 pounds in tax- free income that you can earn
each year. Up to this threshold, you won't pay any
income tax or national insurance. Then you've got from 12,570
pounds or up to 50, 000 pounds, roughly speaking, you pay
(01:44):
20% income tax and you'll pay 8% national insurance. Then
above that 50, 000 pound threshold, it's actually 50, 270 pounds. You
then start to pay 40% income tax, which is obviously
the big jump, and you then pay an additional 2%
in national insurance. So it's essentially, for every pound that
you earn above 50,000, assume 42 pence goes straight to
(02:06):
HMRC, the rest comes to you. And then there's an
additional rate tax band which not a lot of people
end up getting to, but if you do earn high,
then you've got 125, 000 pounds and 140 pence. When you
earn above that, you then go to the additional rate
band, which is 45% tax, but at that point you're
still not paying any more national insurance. That's essentially how
(02:27):
the main two taxes work. The additional layer to that
is if you've gone to university, of course, and you
have a student loan to repay, it gets a whole
lot worse for you, unfortunately. I am one of those
people. For my band, there's different repayment plans, and the
way it works is once you earn above a certain
threshold, say it's 25, 000, you then start to repay 9%
of everything that you earn above that threshold, again, back
(02:49):
to HMRC. So it adds a lot of additional tax
on, but that's roughly speaking how everything works.
Iona Bain (02:57):
Some would say that's quite a brutal system in so
far as if you then tip over into a new tax band,
then suddenly the amount of tax you're paying is a
lot more. That's why people are looking for those ways
to legally reduce what tax they pay. Can you talk
us through why salary sacrifice could be one of those
tools available?
Tim Paul (03:16):
Yeah. Salary sacrifice, as it sounds, it's exactly that
portion of your salary in return for a non- cash
benefit through your employer. Let's say I earn 40,000 pounds
per year. I can then reduce the amount that I earn by
a specific amount in order to get a non- cash
(03:37):
benefit, which could be a gym membership, it could be
private healthcare, a company car, even, cycling to work. You
can get that all through your employer, and then it
reduces the amount in tax that you pay because it
reduces your income before the tax is deducted on your
payslip. So I would then, say, have a 2, 000- pound non- cash
benefit for the year, which would reduce my taxable salary
(03:58):
to 38,000 pounds, and therefore I'm then paying less tax
on that 38, 000 pounds.
Iona Bain (04:05):
Salary sacrifice definitely sounds really intriguing. What does it actually
look like in practice?
Tim Paul (04:11):
Let's say you want to take more holiday days. You
buy more holiday from your employer. You can do that
through salary sacrifice. If you want subscriptions to buy a
travel card, imagine you're able to do those things before
you pay tax so that you're essentially saving money on
your payslip because you're paying less income tax, not your
insurance. So anything from gym memberships, private healthcare, subscription fees,
(04:35):
electronic devices, it can all go through salary sacrifice and
it reduces taxable income, and therefore the less tax you
will pay on it.
Iona Bain (04:43):
A lot of things that people will be paying for
anyway from their post- tax income, maybe they could get
that actually done at source, which would be much better
for them. How can somebody find out what is available
from their employer in terms of salary sacrifice?
Tim Paul (04:58):
Well, you have to go directly to your employer and
ask if they're willing to enroll you, which, I don't
see why they wouldn't.
Iona Bain (05:04):
Yeah, talk to your boss. See what they say.
Tim Paul (05:05):
Exactly.
Iona Bain (05:07):
It sounds like a great thing, but I'm not going
to lie, salary sacrifice hasn't got the best brand. Those
are two words that you don't want to hear together
because people want to earn as much as they can,
but are there circumstances actually in which going for that
could actually leave you better off because of the tax implications?
Tim Paul (05:25):
Yeah, definitely. As we mentioned before that when you go
into the higher tax bracket, when you're going above the
50k mark, that's when it could become very beneficial, because
rather than getting taxed 40% on that amount, you earn
above. If you only earn, say, 53, 54, 55,000 pounds, you can
then do a salary sacrifice to bring that income back
(05:46):
down to 50, and then with that additional, you're then getting
benefits from your employer, which can obviously benefit your lifestyle
day to day. So it's probably potentially a better way
to go about it. You're being more tax- efficient with your income. That's
probably the key point.
Iona Bain (06:02):
Are you seeing more people looking at salary sacrifice and
seeing it as a valuable benefit that can be offered
by some employers, or is it a little bit under the radar?
Tim Paul (06:11):
I would say it's very under the radar. I wish
more people knew about it. Maybe they could have named
it something a bit more interesting, a salary benefit scheme
or something like that, but people also maybe just don't
really understand it, because they might assume that, " Well, it
just means I'm earning less money," but in actual fact,
if you think about it, you could be paying less
tax and overall be better off.
Iona Bain (06:31):
Salary benefit, I like that. If anyone else has suggestions,
answers on a postcard, we want to hear them. What
about using your pension to reduce your take- home pay?
How would that work?
Tim Paul (06:42):
With your pension, it works in a similar way to
the salary sacrifice scheme. Once you're 22 or older or
working full time, you'll be automatically enrolled into a workplace
pension. And then every time you contribute to it, every
penny that goes in, it gets taken off of your
growth salary before tax gets deducted. Again, it reduces your
(07:02):
taxable salary, soyou're paying less income tax and national insurance, and
of course, that money then goes tax- free into your
pension pot, your employer adds to it, and then obviously
you put that towards your retirement, it reduces the amount of tax you
pay now and it obviously benefits you later in life.
It's probably the key lever, I would say, for any
young person, 30s, 40s, whatever age you are, or if you're
(07:23):
about to go into a higher tax bracket, if you've got
a big bonus coming one off that might push you
into a higher tax bracket, then just putting a bit
more into your pension, even if it's an extra few
percent, it's going to make a difference in how much
tax you pay. Of course, the big difference is how
much will then eventually get added by your employer, and
then it compounds because it gets invested over time, and
(07:43):
then you retire hopefully with a nice pot and you
can be more comfortable and not have to rely on
your kids to look after you.
Iona Bain (07:49):
Yeah. None of us want that. It's one of those rare
instances where it's actually a win- win. Doing what's right
for you in the long term can actually benefit you
in the here and now. How well- informed are we
when it comes to tax? Because I can say quite
honestly, I've been a financial journalist for nearly 15 years,
tax is one of these subjects that I still don't
(08:09):
really love writing and talking about, partly because it can
get really, really confusing. What are the most common misconceptions
that you hear about when it comes to tax?
Tim Paul (08:19):
The most common misconception is thinking that your payslip is
viable and it's correct. Of course, HMRC does make mistakes.
I actually had a mistake of mine when I first
started my employment. I was overpaying my student loan by
60 pounds a month.
Iona Bain (08:34):
How long had that been going on?
Tim Paul (08:35):
I caught it early. I caught it within I think
three months, but over a course of a year, that's-
Iona Bain (08:39):
That would add up.
Tim Paul (08:40):
... hundreds and hundreds of pounds that you're losing, that
you shouldn't be. But it's good to check because often
people don't realize that they are not reclaiming money that
they could be. The other one is a lot of
people for whatever reason seem to think that when they
go into a high tax bracket, it means that they're
going to be taking home less income. With the 50, 000-
pound bracket, when you then go to 40% tax, a
(09:01):
lot of people seem to think that, oh, well, because
I'm now getting taxed on 40%, I'm actually worse off,
but the reality is you're never worse off because the
threshold means that you only pay the 40% on what
you earn above that amount. So people do get very
confused about that. You just have to remember it's a
marginal system. Getting a pay rise is never a bad
thing. Never say no to a pay rise, essentially, is the
(09:23):
advice that I would give. But, yeah, that's one thing
that I've seen a lot of people get confused about.
In general, I just think that people care about how
much they earn post- tax. They never really think about
what they're paying on their payslips, really, because it doesn't
get talked about and it's not interesting. No one wants
to sit there and think about the money that they're
losing to HMRC every single month. So I think it's
(09:45):
just about awareness and making sure that people understand the
importance of knowing it early because unclaimed tax for years
and years is really going to be putting you in
a worse position. Pensions, again, another one putting you in
a worse position if you just don't think about it.
The key is to make sure that you're reading up
and then taking action.
Iona Bain (10:04):
There may be people thinking, is this stuff that I'm
allowed to do? Because when we talk about tax, sometimes
we get a bit uncomfortable. People think, sounds a little
bit like tax avoidance. Just talk us through how legal
all this is.
Tim Paul (10:17):
Completely legal. I think with the salary sacrifice, some people
might think that, oh, my employer might not want to
do that or might not be willing to or they
can't, but it's actually in your employer's best interest as
well, because by going through salary sacrifice, they're actually reducing
their national insurance contributions, because employees make national insurance contributions,
but employers do at the same time as well. So
(10:37):
it's in the best interest of both because they both
will reduce the amount of national insurance they pay, and
instead that money will go towards actually helping the employees
with whatever it is that they want to do. It is
a win- win and, like I said, completely legal.
Iona Bain (10:51):
And when it comes to pensions, that's something that the
government wants us to save more for because that reduces
state dependency later on.
Tim Paul (10:56):
Yes. Exactly.
Iona Bain (10:57):
Are there times where people need to be a bit
more careful about reducing their take- home pay?
Tim Paul (11:02):
Yeah. There'll be one instance where if you're looking to apply
for a mortgage in the near future, you just want to make
sure that you're not reducing your income by a significant
amount whereby it could impact what lenders call accessibility of
affordability, so essentially is really about speaking to your mortgage
(11:23):
broker, making sure that they're aware that you're claiming whatever
benefits you are through salary sacrifice and making sure that
it doesn't impact your affordability when you come to do
the mortgage application. But again, we're talking about it would
only really have an impact if we're looking at maybe
upwards of 5, 6, 7, 000 pounds that you're sacrificing
in salary. Then it could start to have a bit
of an impact on your mortgage application. The other one
(11:45):
would be your national insurance contributions. To get your state
pension, you obviously need 35 years of qualifying national insurance
contributions. If you're increasing your salary sacrifice and then reducing
your income, then you could potentially fall below that threshold,
but that threshold is only about 6, 400 pounds a
year. Most people will be significantly above that, anyway, but
(12:07):
just one other thing to consider.
Iona Bain (12:10):
If someone is about to approach one of these tax
thresholds, is there a checklist that they can go through
in terms of what they should be thinking about?
Tim Paul (12:19):
The key thing is to understand what's going on in
your payslip. What does your tax code say? Does that
correspond to what it should say? These are the things
to check. And then if you're getting closer to a
higher tax bracket, once you've obviously done the initial check,
then it's a case of thinking about salary sacrifice, how
much you contribute to a pension, and those kinds of things.
Iona Bain (12:36):
All really, really good tips, Tim. Thank you very much.
Tim Paul (12:38):
You're welcome.
Iona Bain (12:38):
That's all for part one. Next time, we'll be talking through
tax on side hustles, rental income and personal savings allowances,
and we'll also cover tax- free childcare and have some
quick wins to make sure you're not paying any more
tax than you need to. This podcast is brought to
you by L& G. You can keep up with the
show on YouTube, TikTok and Instagram, @ legalandgeneral. If you have a
(13:04):
question or a topic that you would like answered on
the show, then please do get in touch on our
socials. We would absolutely love to hear from you. Until
next time, see you soon.
This series is brought to you by L& G, helping
you build a future that's a little bit richer.
Iona Bain (00:06):
Hello and welcome to A Little Bit Richer, with me,
Iona Bain, brought to you by Legal & General. Now today
we're focusing on tax, something that gets taken before you're
paid, so we don't think about it too often, but
maybe you've seen videos online or heard stuff from friends
about ways you can reduce the amount of money the HMRC
gets from you. And you might be wondering, is that
(00:27):
complicated? What's the catch? Where do I start? Well, we've
enlisted someone who is definitely going to help us understand
this whole area, and that is tax advisor Tim Paul.
He's actually joining us for a special two- part episode.
Tim is a certified accountant, social media finance content creator,
and is the co- founder of his own accountancy practice,
(00:49):
so I think he knows a thing or two about
tax. He's going to enlighten us on ways you can
reduce the tax you pay while improving your longer- term
finances all in a way that is perfectly legal. This is
going to be an interesting one. Welcome, Tim.
Tim Paul (01:05):
Thank you. I love that intro. It makes me sound
really qualified. Great.
Iona Bain (01:09):
Well, you've got a lot to live up to now.
Tim Paul (01:11):
Exactly.
Iona Bain (01:12):
Can you just give us a very brief overview of
how salaries are taxed in the UK, what the different
tax thresholds and tax bands are? Just talk us through it.
Tim Paul (01:23):
In the UK, we run on a marginal tax system,
which, the more you earn, the more you get taxed. Right at the start,
you've got your 12,570 pounds in tax- free income that you can earn
each year. Up to this threshold, you won't pay any
income tax or national insurance. Then you've got from 12,570
pounds or up to 50, 000 pounds, roughly speaking, you pay
(01:44):
20% income tax and you'll pay 8% national insurance. Then
above that 50, 000 pound threshold, it's actually 50, 270 pounds. You
then start to pay 40% income tax, which is obviously
the big jump, and you then pay an additional 2%
in national insurance. So it's essentially, for every pound that
you earn above 50,000, assume 42 pence goes straight to
(02:06):
HMRC, the rest comes to you. And then there's an
additional rate tax band which not a lot of people
end up getting to, but if you do earn high,
then you've got 125, 000 pounds and 140 pence. When you
earn above that, you then go to the additional rate
band, which is 45% tax, but at that point you're
still not paying any more national insurance. That's essentially how
(02:27):
the main two taxes work. The additional layer to that
is if you've gone to university, of course, and you
have a student loan to repay, it gets a whole
lot worse for you, unfortunately. I am one of those
people. For my band, there's different repayment plans, and the
way it works is once you earn above a certain
threshold, say it's 25, 000, you then start to repay 9%
of everything that you earn above that threshold, again, back
(02:49):
to HMRC. So it adds a lot of additional tax
on, but that's roughly speaking how everything works.
Iona Bain (02:57):
Some would say that's quite a brutal system in so
far as if you then tip over into a new tax band,
then suddenly the amount of tax you're paying is a
lot more. That's why people are looking for those ways
to legally reduce what tax they pay. Can you talk
us through why salary sacrifice could be one of those
tools available?
Tim Paul (03:16):
Yeah. Salary sacrifice, as it sounds, it's exactly that
portion of your salary in return for a non- cash
benefit through your employer. Let's say I earn 40,000 pounds
per year. I can then reduce the amount that I earn by
a specific amount in order to get a non- cash
(03:37):
benefit, which could be a gym membership, it could be
private healthcare, a company car, even, cycling to work. You
can get that all through your employer, and then it
reduces the amount in tax that you pay because it
reduces your income before the tax is deducted on your
payslip. So I would then, say, have a 2, 000- pound non- cash
benefit for the year, which would reduce my taxable salary
(03:58):
to 38,000 pounds, and therefore I'm then paying less tax
on that 38, 000 pounds.
Iona Bain (04:05):
Salary sacrifice definitely sounds really intriguing. What does it actually
look like in practice?
Tim Paul (04:11):
Let's say you want to take more holiday days. You
buy more holiday from your employer. You can do that
through salary sacrifice. If you want subscriptions to buy a
travel card, imagine you're able to do those things before
you pay tax so that you're essentially saving money on
your payslip because you're paying less income tax, not your
insurance. So anything from gym memberships, private healthcare, subscription fees,
(04:35):
electronic devices, it can all go through salary sacrifice and
it reduces taxable income, and therefore the less tax you
will pay on it.
Iona Bain (04:43):
A lot of things that people will be paying for
anyway from their post- tax income, maybe they could get
that actually done at source, which would be much better
for them. How can somebody find out what is available
from their employer in terms of salary sacrifice?
Tim Paul (04:58):
Well, you have to go directly to your employer and
ask if they're willing to enroll you, which, I don't
see why they wouldn't.
Iona Bain (05:04):
Yeah, talk to your boss. See what they say.
Tim Paul (05:05):
Exactly.
Iona Bain (05:07):
It sounds like a great thing, but I'm not going
to lie, salary sacrifice hasn't got the best brand. Those
are two words that you don't want to hear together
because people want to earn as much as they can,
but are there circumstances actually in which going for that
could actually leave you better off because of the tax implications?
Tim Paul (05:25):
Yeah, definitely. As we mentioned before that when you go
into the higher tax bracket, when you're going above the
50k mark, that's when it could become very beneficial, because
rather than getting taxed 40% on that amount, you earn
above. If you only earn, say, 53, 54, 55,000 pounds, you can
then do a salary sacrifice to bring that income back
(05:46):
down to 50, and then with that additional, you're then getting
benefits from your employer, which can obviously benefit your lifestyle
day to day. So it's probably potentially a better way
to go about it. You're being more tax- efficient with your income. That's
probably the key point.
Iona Bain (06:02):
Are you seeing more people looking at salary sacrifice and
seeing it as a valuable benefit that can be offered
by some employers, or is it a little bit under the radar?
Tim Paul (06:11):
I would say it's very under the radar. I wish
more people knew about it. Maybe they could have named
it something a bit more interesting, a salary benefit scheme
or something like that, but people also maybe just don't
really understand it, because they might assume that, " Well, it
just means I'm earning less money," but in actual fact,
if you think about it, you could be paying less
tax and overall be better off.
Iona Bain (06:31):
Salary benefit, I like that. If anyone else has suggestions,
answers on a postcard, we want to hear them. What
about using your pension to reduce your take- home pay?
How would that work?
Tim Paul (06:42):
With your pension, it works in a similar way to
the salary sacrifice scheme. Once you're 22 or older or
working full time, you'll be automatically enrolled into a workplace
pension. And then every time you contribute to it, every
penny that goes in, it gets taken off of your
growth salary before tax gets deducted. Again, it reduces your
(07:02):
taxable salary, soyou're paying less income tax and national insurance, and
of course, that money then goes tax- free into your
pension pot, your employer adds to it, and then obviously
you put that towards your retirement, it reduces the amount of tax you
pay now and it obviously benefits you later in life.
It's probably the key lever, I would say, for any
young person, 30s, 40s, whatever age you are, or if you're
(07:23):
about to go into a higher tax bracket, if you've got
a big bonus coming one off that might push you
into a higher tax bracket, then just putting a bit
more into your pension, even if it's an extra few
percent, it's going to make a difference in how much
tax you pay. Of course, the big difference is how
much will then eventually get added by your employer, and
then it compounds because it gets invested over time, and
(07:43):
then you retire hopefully with a nice pot and you
can be more comfortable and not have to rely on
your kids to look after you.
Iona Bain (07:49):
Yeah. None of us want that. It's one of those rare
instances where it's actually a win- win. Doing what's right
for you in the long term can actually benefit you
in the here and now. How well- informed are we
when it comes to tax? Because I can say quite
honestly, I've been a financial journalist for nearly 15 years,
tax is one of these subjects that I still don't
(08:09):
really love writing and talking about, partly because it can
get really, really confusing. What are the most common misconceptions
that you hear about when it comes to tax?
Tim Paul (08:19):
The most common misconception is thinking that your payslip is
viable and it's correct. Of course, HMRC does make mistakes.
I actually had a mistake of mine when I first
started my employment. I was overpaying my student loan by
60 pounds a month.
Iona Bain (08:34):
How long had that been going on?
Tim Paul (08:35):
I caught it early. I caught it within I think
three months, but over a course of a year, that's-
Iona Bain (08:39):
That would add up.
Tim Paul (08:40):
... hundreds and hundreds of pounds that you're losing, that
you shouldn't be. But it's good to check because often
people don't realize that they are not reclaiming money that
they could be. The other one is a lot of
people for whatever reason seem to think that when they
go into a high tax bracket, it means that they're
going to be taking home less income. With the 50, 000-
pound bracket, when you then go to 40% tax, a
(09:01):
lot of people seem to think that, oh, well, because
I'm now getting taxed on 40%, I'm actually worse off,
but the reality is you're never worse off because the
threshold means that you only pay the 40% on what
you earn above that amount. So people do get very
confused about that. You just have to remember it's a
marginal system. Getting a pay rise is never a bad
thing. Never say no to a pay rise, essentially, is the
(09:23):
advice that I would give. But, yeah, that's one thing
that I've seen a lot of people get confused about.
In general, I just think that people care about how
much they earn post- tax. They never really think about
what they're paying on their payslips, really, because it doesn't
get talked about and it's not interesting. No one wants
to sit there and think about the money that they're
losing to HMRC every single month. So I think it's
(09:45):
just about awareness and making sure that people understand the
importance of knowing it early because unclaimed tax for years
and years is really going to be putting you in
a worse position. Pensions, again, another one putting you in
a worse position if you just don't think about it.
The key is to make sure that you're reading up
and then taking action.
Iona Bain (10:04):
There may be people thinking, is this stuff that I'm
allowed to do? Because when we talk about tax, sometimes
we get a bit uncomfortable. People think, sounds a little
bit like tax avoidance. Just talk us through how legal
all this is.
Tim Paul (10:17):
Completely legal. I think with the salary sacrifice, some people
might think that, oh, my employer might not want to
do that or might not be willing to or they
can't, but it's actually in your employer's best interest as
well, because by going through salary sacrifice, they're actually reducing
their national insurance contributions, because employees make national insurance contributions,
but employers do at the same time as well. So
(10:37):
it's in the best interest of both because they both
will reduce the amount of national insurance they pay, and
instead that money will go towards actually helping the employees
with whatever it is that they want to do. It is
a win- win and, like I said, completely legal.
Iona Bain (10:51):
And when it comes to pensions, that's something that the
government wants us to save more for because that reduces
state dependency later on.
Tim Paul (10:56):
Yes. Exactly.
Iona Bain (10:57):
Are there times where people need to be a bit
more careful about reducing their take- home pay?
Tim Paul (11:02):
Yeah. There'll be one instance where if you're looking to apply
for a mortgage in the near future, you just want to make
sure that you're not reducing your income by a significant
amount whereby it could impact what lenders call accessibility of
affordability, so essentially is really about speaking to your mortgage
(11:23):
broker, making sure that they're aware that you're claiming whatever
benefits you are through salary sacrifice and making sure that
it doesn't impact your affordability when you come to do
the mortgage application. But again, we're talking about it would
only really have an impact if we're looking at maybe
upwards of 5, 6, 7, 000 pounds that you're sacrificing
in salary. Then it could start to have a bit
of an impact on your mortgage application. The other one
(11:45):
would be your national insurance contributions. To get your state
pension, you obviously need 35 years of qualifying national insurance
contributions. If you're increasing your salary sacrifice and then reducing
your income, then you could potentially fall below that threshold,
but that threshold is only about 6, 400 pounds a
year. Most people will be significantly above that, anyway, but
(12:07):
just one other thing to consider.
Iona Bain (12:10):
If someone is about to approach one of these tax
thresholds, is there a checklist that they can go through
in terms of what they should be thinking about?
Tim Paul (12:19):
The key thing is to understand what's going on in
your payslip. What does your tax code say? Does that
correspond to what it should say? These are the things
to check. And then if you're getting closer to a
higher tax bracket, once you've obviously done the initial check,
then it's a case of thinking about salary sacrifice, how
much you contribute to a pension, and those kinds of things.
Iona Bain (12:36):
All really, really good tips, Tim. Thank you very much.
Tim Paul (12:38):
You're welcome.
Iona Bain (12:38):
That's all for part one. Next time, we'll be talking through
tax on side hustles, rental income and personal savings allowances,
and we'll also cover tax- free childcare and have some
quick wins to make sure you're not paying any more
tax than you need to. This podcast is brought to
you by L& G. You can keep up with the
show on YouTube, TikTok and Instagram, @ legalandgeneral. If you have a
(13:04):
question or a topic that you would like answered on
the show, then please do get in touch on our
socials. We would absolutely love to hear from you. Until
next time, see you soon.
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