Salary Sacrifice

edited 30 November -1 at 1:00AM in Cutting Tax
1 reply 659 views
r-sharr-shar Forumite
23 Posts
edited 30 November -1 at 1:00AM in Cutting Tax
Help - I am totally confused by all the info I have downloaded. Putting it simply I earn about 35K with a discretionay bonus of about 15K which dumps me into higher tax. I do not have a pension. I have read up on salary sacrifice and think I would opt for this and start paying my bonus and some salary into a personal pension.
I have read that the upper limit for earning for NI is rising from about 34K to 40K next year so I don;t know whether to simply pay all my bonus into sacrifice or do I need to keep my earning up at the top to get max SP2?
Do I really gain from salary sacrifice? I will be able to persuade my employer to pay at leat half of any NI savings into my pot but I did read somewhere that any contributions to an employees pension did not incur NI for the company so maybe there is no gain to me or the company?
Hope soemone can help me unravel this.
Cheers
:confused:

Replies

  • cw18cw18 Forumite
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    I've been on salary sacrifice since the start of this tax year, in return for a non-contributory employer pension. As pension contributions are tax free anyway, I don't gain anything from that -- and wouldn't be on higher rate even if I didn't have a pension of any sort. The only place I gain is that I don't have to pay NI contributions on the amount of salary I've given up.

    As best I can tell/recall from when we were briefed on the option
    1. people who earn below £90 a week gain nothing by doing salary sacrifice (even if they're allowed) as they're already below the level to pay either NI or tax (assuming tax code is a standard personal allowance)
    2. people who earn between £90 and £770 a week save the 11% they would otherwise pay in NI contributions
    3. people earning above £770 a week (and where they're still on this level after the sacrificed part is taken off) only save 1% in NI contributions


    If at the highest level of income, then 1% saving doesn't sound a lot, but my attitude is that it's 1% extra in the pocket/pension pot rather than handed over to the government ;)



    And as far as I'm aware, if you're in a contributory pension scheme, then the company have to pay NI on the contributions just as you do...... it was that saving for the company that persuaded them to offer the scheme


    ETA: If you pay the money into a pension scheme without a salary sacrifice scheme, you can claim back any tax you've paid on those contributions. So anything you pay in that would have been taxed at the higher rate actually means that it's only costing you £60 for every £100 that goes into the scheme.

    The one and only year I had so much overtime etc to be well into the highest bracket I paid into the company AVC scheme -- and adjusted the payments each week once I knew what my overtime etc was. At that point the maximum that could be paid into a pension scheme was 15% of your salary (it's now a fixed amount instead), and I hit that 15% maximum much to the bewilderment of our payroll department who had to make sure I didn't exceed that figure,
    Cheryl
    Grocery Budget : January £155. Spent £33.75 in shops + £0.00 from stocks = £32.45
    Grocery Budget : 2021 £1825. Spent £33.75 in shops + £0.00 from stocks = £32.45
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