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Saturday, 4 July 2009

A word of advice to any BT employees considering taking the "sabbatical option"

BT are offering their staff the option of one year's holiday in return for a payment equal to 25% of salary. I don't know all the details so can't comment on the whole ackage, but if you are considering taking a year out and won't be disappearing overseas on a contract, but will be bumbing around or studying, then some tax planning might come in handy if you are a higher rate tax payer.

If you are going to be paid 125% of your salary over the next 2 years then it is quite likely that your income in one of those 2 years would fall below the higher rate threshold in one of those years which might be inefficient because you could be paying higher rate tax in the other year. With a bit of careful planning you should be able to either stop working or defer the receipt of income from BT so that your income in the year to 5 April 2010 is about the same as your taxable income in the year t0 5 April 2011, in which case you will have the most efficient tax profile.

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