Cash Clinic: As 40% tax threshold is lowered, is there a way to stay under it?

Question: I am a 40-year-old full-time employee and my earnings are currently subject to basic rate tax. However, it turns out that from April I will have to pay higher rate tax, even though my salary is not going up. Are there any steps I can take to improve my position? SW Edinburgh

Answer: Your situation is far from unique. The Institute for Fiscal Studies recently estimated that 750,000 more people are set to become higher-rate taxpayers when the new tax year begins. This is a result of the threshold for the 40 per cent rate falling to 35,001 of taxable income with effect from 6 April, down from the current 37,401. Assuming a standard personal allowance of 7,475, higher rate tax at a rate of 40 per cent will apply to earnings above 42,476 from 6 April.

The most obvious way to reduce the level of income tax you are liable to would be through pension contributions, which would have the effect of expanding your basic rate tax band by the gross amount you contribute. Pension contributions receive tax relief at your highest marginal rate, which in your circumstances would be at 40 per cent. You would pay the contribution net of basic rate tax of 20 per cent and then reclaim the additional 20 per cent (the difference between the basic and higher rate) through your self-assessment tax return. This means that the net cost to you for each 100 invested in a pension would be 60, where higher rate relief is granted.

Making a pension contribution is a tax-efficient form of long-term saving. But as you would normally have no access to your funds before you reach age 55 it would not appear the most suitable solution if your monthly budget was tight and you needed access to as much of your net income as possible.

In these circumstances, you should try to get as much "bang for your buck" from your employment package as you can. For instance, many employers allow you to sacrifice or exchange salary for an alternative form of benefit. Notable examples would be for employer pension contributions (which are attractive if the employer adds in all or part of the national insurance saving made through not paying the benefit as salary) or childcare vouchers.

Childcare vouchers are a good solution for parents with children under 16 who use registered childcare services. They allow a non-taxable sum of up to 243 per parent per month to be used as payment towards qualifying childcare costs such as nurseries and out-of-school club fees, while they do not attract national insurance. A higher rate taxpayer could currently save just under 100 a month in tax using the scheme.Higher rate payers not in a childcare voucher scheme should act quickly if interested as members this tax year can continue to receive the full amount next year onwards, while new higher rate taxpaying entrants will be restricted to 121 of vouchers per month.

• Stephen Hall is a wealth manager at HBJ Gateley Wareing.