Income and Tax

I am a contractor via an ltd, self-employed or umbrella (Inside or Outside IR35)

Currently, you cannot explicitly define contractor income on Saving Tool Advanced. The simplest solution is to do your own calculations to estimate an equivalent annual salary, and work with that.

Generally speaking, taxes on income are broadly the same as PAYE for self-employed and umbrella contractors. However, they are usually different with limited company directors, where dividends are often used.

You can use the free tool to help translate your take-home back to an annual salary.

If you would like to see native support for contractor income on Saving Tool Advanced, please share your feedback.

What about emergency funds?

Having an emergency fund covering 3-6 months is a sensible and common approach to financial planning. Saving Tool Advanced does not have native support for defining your emergency fund. However, you can define a liability in a scenario that represents directing income to your emergency fund.

How are bonuses handled?

If you receive a bonus as part of your income, you can add this under Other Income. This simply adds the bonus amount to your total income. Due to this, pension contributions are deducted from the new total income amount.

If you receive a bonus that has different pension treatment (e.g. bonus sacrifice or partial bonus sacrifice), you can control how much income is added to your pension by specifying Pensionable Income in the Workplace Pension section.

Can I define maternity or paternity leave in a scenario?

There is no natively support for defining this, however, you can effectively apply the financial impact by defining a Liability (or Windfall) in the Expenditure tab. You will need to calculate the financial impact yourself, then apply this number using a Liability or Windfall to the relevant year.

How can I specify one-off gains or expenses I expect to happen in the future?

Saving Tool Advanced allows you to do this. You can specify Windfalls for expected future income (e.g. inheritance, capital gains) and Liabilities for expected future expenses (e.g. home improvements). In general, it'`s recommended to specify all your regular income and outgoings using the You and Expenditure tabs, and only using Windfalls/Liabilities for one-off or unusual, larger income/expenses.

What about cash savings accounts?

The Default Strategy does not make use of cash savings accounts, as it prefers investment accounts. If you have any income from interest from cash savings, how you reflect this in a scenario depends how much income you have earned from it.

If you earned a tax-free amount of interest (maximum £1,000, but lower for higher or additional rate taxpayers - see rates), you can add this to a scenario as a tax-free Windfall.

If you have earned a taxable amount of interest, you can simply add this as a taxable Windfall.

If you have earned a taxable amount of interest but also some tax-free interest, you can add the tax-free portion as a tax-free Windfall and the rest as a taxable Windfall.

You should avoid adding this form of income to Salary or Other Income because pension contributions are applied there (and income from interest on cash would not benefit from pension contributions).

I live in Scotland and/or pay Scottish taxes. Is that supported?

Yes - simply edit the Tax Residency of the scenario to control this, under Simulation Settings.


What types of pensions are supported?

Both Defined Contribution and Defined Benefit pensions are supported by Saving Tool Advanced. Simply select the pension type you have in the Workplace Pension section.

I have a tapered or reduced annual pension allowance, does Saving Tool Advanced support this?

You can apply a tapered pension allowance to a scenario by manually working out your annual contributions, then specifying this as an absolute amount (by selecting the £ icon in the input field). Alternatively, you can specify Pensionable Income in the Workplace Pension section. Saving Tool Advanced will not automatically calculate pension tapering.

I have a pension scheme that combines Defined Contribution and Defined Benefit types, such as the Universities Superannuation Scheme (USS).

Currently, you can only define one type of pension as your active (current) Workplace Pension. In this situation, it'`s generally recommended to specify the Defined Benefit pension part, since that is typically the significant portion of value. If you specify a Defined Benefitpension, you will have the option to set a cap/threshold or manually define Additional Voluntary Contributions (AVCs).


What are the key assumptions that Saving Tool Advanced makes?

They key assumptions the tool makes are:
  • You are not experiencing financial distress, reliant on external financial support (e.g. universal credit) or insolvent
  • By investing in index funds, real terms growth of 5% can be sustained in the long-term. This applies to pensions, your Stocks & Shares ISA (S&S ISA) and General Investment Accounts (GIAs). This is based on assumed growth of 7.5% Year-on-Year and 2.5% inflation
  • Invested funds are charged an annual fee of 0.35%
  • All student loans are cancelled after 30 years of the simulation. Although in practice the full maximum duration is typically 30 years, Saving Tool Advanced does not ask for the date when you started to repay
  • Interest is added to student loan debts using the current rates as set in 2024
  • The HMRC tax rates for the current year stay the same for every year simulated (including any tax changes that might take place during the current tax year, such as the January 2024 National Insurance cut)
  • Other types of ISAs such as a Lifetime ISA are not used in the simulation. If you plan to contribute to a different type of ISA or saving account, you can define a Liability and/or Windfall
  • If you are claiming child tax credits, you will need to apply the effect of this to your Income and Expenditure (as opposed to explicitly defining it for a scenario, which is not currently supported)
  • If you are using the marriage allowance, you will need to apply the effect of this to your Income and Expenditure (as opposed to explicitly defining it for a scenario, which is not currently supported)

Is 2.5% inflation a reasonable assumption, considering the spike in recent years?

Using a basis of 2.5% over the long term is considered reasonable by Saving Tool Advanced. This is based on historical rates [1] in the UK over the long term, as opposed to the past 2 or 3 years.

How is inflation handled or displayed in practice?

All the numbers you see in a scenario are in real terms, i.e. are in today's money. In other words, everything is adjusted for inflation.


ISA (Individual Savings Account)

An ISA is a tax-efficient savings and investment account available to UK residents. It allows individuals to save or invest money without paying tax on the interest, dividends, or capital gains earned within the account. There are different types of ISAs to cater to various saving and investment needs, including Cash ISAs, Stocks & Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs.

S&S ISA (Stocks & Shares ISA)

A Stocks & Shares ISA is a type of Individual Savings Account that allows individuals to invest in a range of financial products such as stocks, bonds, and funds. The key advantage of a S&S ISA is the ability to grow investments free from UK capital gains and income tax, up to a certain limit each tax year. The Saving Tool Advanced Default Strategy makes heavy use of S&S ISAs.

Cash ISA

A Cash ISA is a type of Individual Savings Account that offers a tax-free way to save money. Similar to a traditional savings account, it pays interest, but the interest earned is not subject to UK income tax. Cash ISAs are often seen as a safer, more stable investment compared to Stocks & Shares ISAs, though they typically offer lower returns. The Saving Tool Advanced Default Strategy does NOT use Cash ISAs.

LISA (Lifetime ISA)

A Lifetime ISA is designed to help individuals save for their first home or retirement. UK residents aged 18 to 39 can open a LISA and contribute up to a set limit each tax year, receiving a 25% bonus from the government on contributions. Funds can be withdrawn tax-free to purchase a first home or after the age of 60 for retirement purposes. Early withdrawal for other reasons is subject to a penalty. The Saving Tool Advanced Default Strategy does NOT use Lifetime ISAs.

DB Pension (Defined Benefit Pension)

A Defined Benefit (DB) Pension, sometimes known as a final salary pension, provides a guaranteed retirement income based on your salary and the number of years you have been a member of the scheme. The employer bears the investment risk and is responsible for ensuring there is enough money at retirement to pay the promised benefits.

DC Pension (Defined Contribution Pension)

A Defined Contribution (DC) Pension is a retirement savings plan where both the employee and employer contribute to an individual's pension pot, which is then invested. The amount available at retirement depends on the contributions made, investment returns, and any charges taken from the pension pot. Unlike DB Pensions, the individual bears the investment risk.

FI (Financial Independence)

Financial Independence refers to the state of having sufficient personal wealth to cover one's expenses, without having to work.


How does the Offline Scenario work?

Using the offline scenario will only store your scenario in your browser's storage, but you also have the option to import or export the scenario. This means you can download the scenario as a file that contains the scenario information, and later upload it. This allows you to be in control of your offline scenario and use different devices. Please note that you still need to visit Saving Tool Advanced to upload/open your offline scenario - it is just the scenario data that stays offline.

Contact us or share your feedback

You can get in touch by emailing or joining the Discord server.

  • [1]: Source: ONS