Salary Sacrifice??

jamesd

They have to pay you at least minimum wage so you can't do it for 100% of your income.

Working tax credit. You're working and will be on a low income so you should qualify even if you're single if you go all the way down to minimum wage. Pension contributions, whether by salary sacrifice or not, reduce income for tax credit calculations. If you work 40 hour weeks and get the £12,064 a year income you'll be entitled to £479.02 in Working Tax Credit.

You only pay taxes, including NI, on your salary after the sacrifice. If you receive extra payments like cash instead of a company car you'd pay tax as usual on them. This prevented me from going all the way down to minimum wage a couple of years ago. My employer would let me go down to minimum wage before benefits but the car payment then took me above the working tax credit level so I didn't qualify for it.

The availability of working tax credits can make it more efficient to sacrifice a lot one year then a little for a couple of years to build up savings. Repeat as appropriate to maximise your gain.

wireframe_2

I think this answers pretty much all my questions for now, thankyou so much for your help, guys (and gals)!

nancy1919

My employer operates the salary sacrifice scheme but I don't pay NI contributions as I am female and over 60. Does the salary sacrifice benefit me or my employer in any way - or is it to my disadvantage? I opted out last year as I didn't see anything in it for me but I've been 'opted in' automatically by my employer this year.

Aegis

nancy1919 wrote: »

My employer operates the salary sacrifice scheme but I don't pay NI contributions as I am female and over 60. Does the salary sacrifice benefit me or my employer in any way - or is it to my disadvantage? I opted out last year as I didn't see anything in it for me but I've been 'opted in' automatically by my employer this year.

If they match your contributions, then you still benefit. If they don't pay in, you don't really gain anything that you wouldn't also get from a private pension.

jamesd

[STRIKE]Your employer will still be saving their employer NI at 12.8% of the money you're putting in. Some employers add some of this to the pension, some don't.[/STRIKE] It won't be significantly to your disadvantage, likely not at all.

Paul_Herring

jamesd wrote: »

Your employer will still be saving their employer NI at 12.8% of the money you're putting in.

I thought of answering (the parent) post earlier (in that it's 'neutral',) but the age/NI bit threw me - if the employee isn't paying NI, does the employer still have to?

jamesd

It seems no employer NI assuming listentotaxman is right.

Reduced flexibility about when and how much the contributions should be and being limited to whatever the options in the employer scheme would be the main disadvantages.

property.advert

jamesd wrote: »

They have to pay you at least minimum wage so you can't do it for 100% of your income.

Working tax credit. You're working and will be on a low income so you should qualify even if you're single if you go all the way down to minimum wage. Pension contributions, whether by salary sacrifice or not, reduce income for tax credit calculations. If you work 40 hour weeks and get the £12,064 a year income you'll be entitled to £479.02 in Working Tax Credit.

You only pay taxes, including NI, on your salary after the sacrifice. If you receive extra payments like cash instead of a company car you'd pay tax as usual on them. This prevented me from going all the way down to minimum wage a couple of years ago. My employer would let me go down to minimum wage before benefits but the car payment then took me above the working tax credit level so I didn't qualify for it.

The availability of working tax credits can make it more efficient to sacrifice a lot one year then a little for a couple of years to build up savings. Repeat as appropriate to maximise your gain.

When I spoke to the TC people they confirmed that it didn't matter whether you earned a high salary in one year and next to nothing the next, you would be eligible for TC.

I also understand that if you are a director of a company without a contract of employment, you do not have to abide my NMW limits and can thus avail yourself of even more tax credits !

Keith_Swinford

I'm being offered Salary Sacrifice to back up a company pension scheme at the moment. The NI saving is very small to me, and as it's final salary my personal pensions pot won't increase either, but I guess it will generate a large saving for the company, (this figure is not specified).

I must admit to being a bit suspicious. Once I have changed my conditions of employment and therefore made it non contributory, what's to stop the company then taking a 100% pensions holiday and stopping all payment anyway killing my pension dead in the water?

Anyone got any ideas?

debbt

Hi,

I am the director and only employee of my ltd company. I pay myself just above the LEL to limit my PAYE to a very nominal amount and distribute to myself dividends as and when my cash flow allows. (Nothing since March!) I have only just read about salary sacrifice and am thinking about increasing my notional salary so that I can put extra savings into a pension by getting my company to pay all the NIC reduction. Would this be worth it as I find PAYE a real pain and don't want to pay my accountant even more money to do my payroll. My total income last financial year was only £6780 salary gross plus £4500 dividend. Trying to build up a reserve after a loss the previous year. No wonder I'm skint. Although doing a bit better this year thank goodness.

I have several pension schemes but most are money purchase and I need to seriously increase my contributions otherwise I might as well stop now and so qualify for pension credit. I usually pay lump sums every few years into a PPP or start an ISA.

I've tried the standard life calculator but it's not working at the moment.

Help.