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  • FIRST POST
    • Westminster
    • By Westminster 14th Mar 17, 9:16 AM
    • 687Posts
    • 424Thanks
    Westminster
    Tax efficient was to handle overtime
    • #1
    • 14th Mar 17, 9:16 AM
    Tax efficient was to handle overtime 14th Mar 17 at 9:16 AM
    Hi all

    Can someone confirm if my thinking is correct on something?

    I am doing some internal freelance work for my company this month which is processed through my PAYE payroll.

    The invoice is in the region of £4500 before Tax / NI this month and at least £1400 (and possibly a fair bit more) next month.

    I am already firmly inside the 40% tax band with my basic salary so if I elect to take this as cash, then I am going to lose a substantial portion of it to HMRC.

    As I don't particularly need the money, I was thinking I would ask HR to send the money in to the company pension instead.

    Would that result in the full invoice value being added to the pension or would there also be a top-up from HMRC?

    Cheers
    Last edited by Westminster; 14-03-2017 at 9:19 AM.
    Hi. Martin has asked me to tell you I'm a Board Guide on the following boards: Mortgages & Endowments, Mortgage-Free Wannabe, House Buying, Renting & Selling, Small Biz & Charities' MoneySaving and Charities.

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Page 1
    • Linton
    • By Linton 14th Mar 17, 10:51 AM
    • 7,915 Posts
    • 7,715 Thanks
    Linton
    • #2
    • 14th Mar 17, 10:51 AM
    • #2
    • 14th Mar 17, 10:51 AM
    The full amount should end up in your pension. How it gets there would depend on how your employer normally pays your pension contributions. Either:
    - they take it from the gross and there is no refund from HMRC, or
    - they take it minus 20% from your taxed pay in which case HMRC would refund the 20% basic rate portion into your pension. You would need to ask HMRC to refund the 20% higher rate tax directly to you.
    • Paul_Herring
    • By Paul_Herring 14th Mar 17, 11:22 AM
    • 6,109 Posts
    • 2,788 Thanks
    Paul_Herring
    • #3
    • 14th Mar 17, 11:22 AM
    • #3
    • 14th Mar 17, 11:22 AM
    The full amount should end up in your pension.
    Originally posted by Linton
    May be.

    How it gets there would depend on how your employer normally pays your pension contributions.
    No, how much gets there would depend on the method.

    Either:
    - they take it from the gross and there is no refund from HMRC, or
    - they take it minus 20% from your taxed pay in which case HMRC would refund the 20% basic rate portion into your pension. You would need to ask HMRC to refund the 20% higher rate tax directly to you.
    You're forgetting about National Insurance. If taken gross, NI (and income tax) is not subtracted to begin with. If taken net, the income tax is refunded, but not the NI.
    Conjugating the verb 'to be":
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    • Westminster
    • By Westminster 14th Mar 17, 11:28 AM
    • 687 Posts
    • 424 Thanks
    Westminster
    • #4
    • 14th Mar 17, 11:28 AM
    • #4
    • 14th Mar 17, 11:28 AM
    Thanks both.
    Hi. Martin has asked me to tell you I'm a Board Guide on the following boards: Mortgages & Endowments, Mortgage-Free Wannabe, House Buying, Renting & Selling, Small Biz & Charities' MoneySaving and Charities.

    I'm a volunteer to help the boards run smoothly, and I can move and merge posts on there. Board guides are not moderators and don't read every post. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
    • MEM62
    • By MEM62 14th Mar 17, 4:27 PM
    • 1,221 Posts
    • 869 Thanks
    MEM62
    • #5
    • 14th Mar 17, 4:27 PM
    • #5
    • 14th Mar 17, 4:27 PM
    If you are invoicing for your work it is not overtime. I am sure that your employer should not be paying 'invoices' via PAYE. They should pay you gross and you will account for the tax via submitting a tax return. Any money that is channelled into a pension will offset your tax liability.
    • Westminster
    • By Westminster 14th Mar 17, 5:22 PM
    • 687 Posts
    • 424 Thanks
    Westminster
    • #6
    • 14th Mar 17, 5:22 PM
    • #6
    • 14th Mar 17, 5:22 PM
    I'm on a UK PAYE full-time contract doing internal work (effectively for a different cost centre) - they are adamant for crews on UK contracts that the payments are processed through the payroll. Whether they treat it as overtime or something else I don't know.

    In the company there are a number of crews on offshore contracts who do just receive the whole amount gross.

    Here is the text (with a little redaction):
    Freelance remuneration for XXXXX crews on a UK contract is to be invoiced and processed
    through the XXXXXX UK payroll. Invoices are to be submitted using the invoice form available on the
    XXXXXXXXX Portal
    Last edited by Westminster; 14-03-2017 at 5:34 PM.
    Hi. Martin has asked me to tell you I'm a Board Guide on the following boards: Mortgages & Endowments, Mortgage-Free Wannabe, House Buying, Renting & Selling, Small Biz & Charities' MoneySaving and Charities.

    I'm a volunteer to help the boards run smoothly, and I can move and merge posts on there. Board guides are not moderators and don't read every post. If you spot an inappropriate or illegal post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • jamesd
    • #7
    • 14th Mar 17, 10:20 PM
    • #7
    • 14th Mar 17, 10:20 PM
    Their payroll handling for you looks right to me. Doubt that you could be considered to be anything other than an employee. This means that they will have to pay employer NI and they would probably prefer to save some or all of that by making a payment into the pension instead.
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