Salary Sacrifice??

jamesd

stamboy wrote: »

Thanks, so in the first instance (£4k), I don't need to fill anything on my tax returns in terms of pension contributions in order for it to be grossed up as grossing up doesn't happen? Secondly, how much would be put into my pension in total including grossing-up? £4k?

Correct.

stamboy wrote: »

How would the last option work where you mentioned the 3,600 grossing up? Would I put down £3,600 personal contributions on my tax return and the Govt would gross up by 20% effectively making my total in the pot of £3600+£720=£4320?

You'd pay in 2880. About a month later 25% would be added automatically by the tax payment to take it up to 3600 gross. No need for you to make a tax return or do anything to claim this, it's handled by the pension provider.

stphnstevey

Came across this Salary sacrifice thread and at first reading the early posts was wondering where the 'Salary Sacrifice King' was, then jamesd turned up and all was well (there is not a lot he doesn't know about this and what he doesn't know....he hasn't invented yet )

Have I got this just about right?
Short –
- Employee agrees to lower salary
- Employer pays money into pension with saved
o employee and employer NI
o employee IT (which they would have had refunded for personal pension contributions anyway)
- Reduces salary
o Could reduce higher rate tax payer into the lower rate band
o Make eligible for benefits
o Reduce State Pension as less NI contributions
o Reduction in salary in calculation mortgage lenders use

For me personally, as I own the company I work for and can decide what employer pension contributions are made, guess this wouldn't benefit me much?

What other 'benefits' can be paid for via Salary Sacrifice - I know of Child Care vouchers but I saw somehting bout Company Car schemes on the 'tinter'net?

higgey

This has pros and cons, as outlined above. It is certainly not suitable for lower paid people but might be of interest to those on a higher salary.

Go see an IFA who deals in Employee Benefits if you want to get the right advice.

John H.

david78

It doesn't make any difference on the tax you pay. Otherwise the above short list is okay.

jamesd

stphnstevey wrote: »

wondering where the 'Salary Sacrifice King' was, then jamesd turned up and all was well (there is not a lot he doesn't know about this and what he doesn't know....he hasn't invented yet )

Flatterer!

stphnstevey wrote: »

employee and employer NI

Maybe. The employer decides what to do with their saved employer NI.

stphnstevey wrote: »

Reduce State Pension as less NI contributions

Reduced S2P but only if you're sacrificing in the S2P payment range. Higher rate tax payers can sacrifice down to the higher rate point without a reduction becuase they already don't get extra S2P for earnings over the S2P contribution limit.

stphnstevey wrote: »

Reduction in salary in calculation mortgage lenders use

Depends on whether the scheme reports salary before or after sacrifice.

stphnstevey wrote: »

For me personally, as I own the company I work for and can decide what employer pension contributions are made, guess this wouldn't benefit me much?

Well, you'd naturally want to do it via salary sacrifice because it's cheaper for any given amount of pension final value.

stphnstevey wrote: »

What other 'benefits' can be paid for via Salary Sacrifice - I know of Child Care vouchers but I saw somehting bout Company Car schemes on the 'tinter'net?

Here are some examples of various options and how they are taxed:

Benefit in kind tax (P11D income tax filing, or collected in payroll, depending on the scheme):

yes: childcare vouchers above a limit, critical illness insurance, retail vouchers, private medical insurance, dental insurance, partner's life assurance

no: bike, ill health income protection (PHI), life assurance, pension, childcare vouchers up to £55 per week

Employee NI to pay:

yes: childcare vouchers above limit, retail vouchers

no: bike, critical illness insurance, private medical insurance, dental insurance, ill health income protection, life assurance, partner's life assurance, pension, childcare vouchers up to £55 per week

Debt_Free_Chick

Originally Posted by stphnstevey
For me personally, as I own the company I work for and can decide what employer pension contributions are made, guess this wouldn't benefit me much?

jamesd wrote: »

Well, you'd naturally want to do it via salary sacrifice because it's cheaper for any given amount of pension final value.

Surely it's neutral. If the OP can make an employer contribution to the pension scheme without sal sacrifice, there's no tax or NI paid by the company or the employee. Employer pension contributions do not attract tax or NI by the employer and they're not taxed/NI'd as a BIK.

No difference ...?

jamesd

Same difference. If the employer makes an employer contribution that's exactly the same as salary sacrifice because that's all salary sacrifice is.

The real choice is salary sacrifice or PAYE pay then contribute from after tax PAYE pay. Salary sacrifice is clearly the more efficient of those two choices.

Debt_Free_Chick

jamesd wrote: »

Same difference. If the employer makes an employer contribution that's exactly the same as salary sacrifice because that's all salary sacrifice is.

But I think the OP was suggesting that rather than actually doing salary sacrifice, he would give himself the benefit of an employer contribution without any reduction in his current salary

"Mere mortals" would have to take a salary cut to get this

And the statement that salary sacrifice is cheaper is not, in this situation, the case

stphnstevey

I was just wondering if salary sacrifice could be of benefit to me, as opposed to employer contributions. But as they are vertially the same thing, I think I will stick to the easier way for pensions.

However, overcoming a BIK sounds interesting!

I have seen company car schemes (probably the biggest BIK) and your posts on PMI is also interesting

Debt_Free_Chick

stphnstevey wrote: »

I was just wondering if salary sacrifice could be of benefit to me, as opposed to employer contributions. But as they are vertially the same thing, I think I will stick to the easier way for pensions.

You're right - they're exactly the same thing. As an employee, I give up (say) £5k of my salary - that's it, I've taken a pay cut.

My employer increases its own contributions to the pension plan by £5k - it's the employer's contribution.

However, overcoming a BIK sounds interesting!

It's the standard tax break - employer's contributions to a registered pension scheme are not classed as a BIK, so no tax impact for the employee.