Decreasing marginal rate thresholds on UK income tax (like going from 60% at 125,139 to 40% at 125,140) is insane and leads to wacky optimisations like the following:
Suppose you predicably earn 150k a year. Taking 110k per year salary and putting 40k in your pension for four years results in less net income than:
* Taking 140k salary and 10k pension in year one
* Take 100k salary and 50k pension in years two, three, and four
In both cases you have taken 440k salary and put 160k in your pension. But in the first case you have paid highest tax rate of 60% tax rate on 40k and in the second case you paid the highest tax rate of 60% on only 12,570.
Since the annual pension allowance is now 60k per year, and you have a three year carry-forward to use unused pension allowance from previous years you can do this trick with quite a wide range of gross salaries. And you can use it for the 125,139 to 125,140 decreasing marginal rate, or the 59,999 to 60,000 decreasing marginal rate due loss of child benefit.
Suppose you predicably earn 150k a year. Taking 110k per year salary and putting 40k in your pension for four years results in less net income than:
* Taking 140k salary and 10k pension in year one
* Take 100k salary and 50k pension in years two, three, and four
In both cases you have taken 440k salary and put 160k in your pension. But in the first case you have paid highest tax rate of 60% tax rate on 40k and in the second case you paid the highest tax rate of 60% on only 12,570.
Since the annual pension allowance is now 60k per year, and you have a three year carry-forward to use unused pension allowance from previous years you can do this trick with quite a wide range of gross salaries. And you can use it for the 125,139 to 125,140 decreasing marginal rate, or the 59,999 to 60,000 decreasing marginal rate due loss of child benefit.