Salary Sacrifice??

fizio

I'm struggling a bit to work out what to d in my circumstances.
Say I earn £50k so am paying 40% Tax.
I also have a company car and other 'benefits' that eat up most of my personal allowance.
I want to make additional pensions contribitions to an amount that get me out of the 40% tax band
Is this as simple as saying that the 40% tax bracket is £35k+£7.2k personal allowance hence approx £42.2k. Therefore I need my monthly post-salary-sacrifice salary to be 42.2/12=£3516? and therefore I can put everything above £3516 into pension contributions and be considered a basic rate tax payer?
The bit i'm unclear on is how things like companty car/medical cover and other BIK's affect the 40% tax band point - or is it 42.2K regardless.

jem16

haf63 wrote: »

The bit i'm unclear on is how things like companty car/medical cover and other BIK's affect the 40% tax band point - or is it 42.2K regardless.

Easiest way to do it is to add up your gross salary, gross savings interest, gross dividend payments, company car and medical cover.

Then subtract £7475 for the personal allowance and £35,000 for the basic rate band. Anything left is higher rate.

If you don't know the amount of the benefits then instead of deducting £7475 take your tax code and add a 5 onto the end of it then deduct that amount. So a tax code of 155L becomes £1555.

fizio

jem16 wrote: »

Easiest way to do it is to add up your gross salary, gross savings interest, gross dividend payments, company car and medical cover.

Then subtract £7475 for the personal allowance and £35,000 for the basic rate band. Anything left is higher rate.

If you don't know the amount of the benefits then instead of deducting £7475 take your tax code and add a 5 onto the end of it then deduct that amount. So a tax code of 155L becomes £1555.

Doesn't seem 'easy' at all

My tax code is K20 so nothing like 155L. I think it means I am in negative territory?
My salary slip lists a 'Pre Salary' say £5k per month
I then have a bunch of 'reductions' for dental/health/bike/insurance/etc
Then i have a 'Post Salary' which is 5k-reductions
Then i have a few other non salary-sacrifice reductions eg stock purchase/tax/ni
Then I have a 'Net Pay' i.e what i get in the bank.
So in your explanation i assume when you say 'gross salary' you mean 'Pre Salary' and i subtract the 7.2+35k?

jem16

haf63 wrote: »

My tax code is K20 so nothing like 155L. I think it means I am in negative territory?

Yes you are. It basically means you have no personal allowance plus another £200 extra is taxable.

For you higher rate tax starts at £35,000 minus £200 so £34,800

So in your explanation i assume when you say 'gross salary' you mean 'Pre Salary' and i subtract the 7.2+35k?

What would be your reference salary? i.e. if you applied for a mortgage what salary would you say you earned?

From that add on any savinsg interest/dividend payments and then deduct £34,800.

ossie

haf63 wrote: »

Doesn't seem 'easy' at all

My tax code is K20 so nothing like 155L. I think it means I am in negative territory?
My salary slip lists a 'Pre Salary' say £5k per month
I then have a bunch of 'reductions' for dental/health/bike/insurance/etc
Then i have a 'Post Salary' which is 5k-reductions
Then i have a few other non salary-sacrifice reductions eg stock purchase/tax/ni
Then I have a 'Net Pay' i.e what i get in the bank.
So in your explanation i assume when you say 'gross salary' you mean 'Pre Salary' and i subtract the 7.2+35k?

Whatever happened to hourly rate?????

Paul_Herring

haf63 wrote:

So in your explanation i assume when you say 'gross salary' you mean 'Pre Salary'

I think what

1) most employees and
2) employers and
3) HMRC

call gross salary, your employer has chosen to call 'pre salary.' Your company is the odd-one-out here.

No wonder some people are confused about monetary matters when companies arbitrarily rename common things by different (obscure) names.

I seem to recall (probably earlier in this same thread) some employer decided to rename 'salary sacrifice' to a more (perceived) PC term since 'sacrifice' was 'un-PC.'

jem16 wrote: »

What would be your reference salary? i.e. if you applied for a mortgage what salary would you say you earned?

Tangent (not applicable here I know): Don't some banks still accept pre-sacrifice gross salary?

fizio

jem16 wrote: »

Yes you are. It basically means you have no personal allowance plus another £200 extra is taxable.

For you higher rate tax starts at £35,000 minus £200 so £34,800

What would be your reference salary? i.e. if you applied for a mortgage what salary would you say you earned?

From that add on any savinsg interest/dividend payments and then deduct £34,800.

So as I see it my Reference Salary = Pre Salary = Gross Salary
I have zero for interest/dividends due to only having ISA type investments

So £34800 is the magic number for me and I need to increase my salary sacrifice pension contributions accordingly

fizio

Paul_Herring wrote: »

I think what

1) most employees and
2) employers and
3) HMRC

call gross salary, your employer has chosen to call 'pre salary.' Your company is the odd-one-out here.

No wonder some people are confused about monetary matters when companies arbitrarily rename common things by different (obscure) names.

I seem to recall (probably earlier in this same thread) some employer decided to rename 'salary sacrifice' to a more (perceived) PC term since 'sacrifice' was 'un-PC.'

Tangent (not applicable here I know): Don't some banks still accept pre-sacrifice gross salary?

Yup - its al a bit unneccesarily complicated but my company info did stat that the Pre Salary can be used for mortgage etc

lightspeed

Hi, Just after a little advice regarding my wifes pension.

She is about to sign up to the company pension scheme and has been offered the salary sacrifice option.

On the face of it it appears to make sense to go with the SS option. I would just like clarification regarding the impact on he salary and take home pay.

Salary: 21,051 (take home £1370)
Contribution: 6% employee/9% employer
from sacrifice:£105.26 (does this mean her salary will be less this amount x12 (£1263.12) meaning her salary is now £19787.88 for borrowing purposes?)
Employer contribution: £164.62
Total cont: £269.87
Net cost to employee: £71.57

Ultimately, will her take home pay amount be £1370 minus £71.57 OR will her take home pay be reduced further based on £19787.88 as her new salary?

Finally, in her situation, is SS the better way to go?

Arthur_Harrison

I have set myself up as a limited company, working for myself, I am quite keen to take up salary sacrifice, to pay more into a pension fund. there is only me in the company as I want to and continue to work for myself. Has anybody got experience of how to go about this as I am in a way my employer and employee? Any advice would be appreciated if someone has already done this!