Salary sacrifice limitation

zagfles

david78 wrote: »

I am sure this is wrong. And contradicts what others have said here.

I make contributions to a final salary scheme by salary sacrifice and my statements show amount of annual allowance used (based on increase in value X 16). By your reasoning I am not using up any annual allowance.

Try reading the paragraph after the one you quoted.

david78

zagfles wrote: »

Try reading the paragraph after the one you quoted.

Ah yes you are quite right. I am mixing up earnings limit and annual allowance.

KB348

Hi All
I am about to start a new job and struggling to make right decision to maximise my income & also to make sure I have enough for living.

Current situation:
Gross salary=38K
Three children under 7 yrs old.

What I am planning to do:
1-salary sacrifice for car lease (around 5K per year)
2-pension contribution
3-apply for tax credit

After research following is my understanding (please correct me if I am wrong):
38K(Gross)-5K(Salary Sacrifice)=33K;
Now Pension contributions (approx 3K) calculations will be based on 33K gross;
For Tax credit (which gross I should use 38K or 33K): If 33K then Income will be 33(gross)-3(pension)=30K+5K (Benefit In Kind)=so my tax credit will be based on 35K income and 3 children (approx=1800 per year)
plus I need to pay 20% tax on 5K BIK (which will be 1K)
Please advise what are the best steps under my circumstances.
Many thanks for your time and cooperation.
Kindest regards.

jamesd

Right about the first line.

Pension contributions in salary sacrifice are usually based on your salary before sacrifice, so it would be a percentage of the full 38k, not the reduced 33k. I'm assuming that you're paying the contributions via salary sacrifice into the work pension scheme.

Your plan seems sensible.

KB348

jamesd wrote: »

Right about the first line.

Pension contributions in salary sacrifice are usually based on your salary before sacrifice, so it would be a percentage of the full 38k, not the reduced 33k. I'm assuming that you're paying the contributions via salary sacrifice into the work pension scheme.

Your plan seems sensible.

Thanks for your reply Jamesd. Both pension and car lease offered by employer.
it means out of 38K gross, 3K deducted for pension and 5K for Salary Sacrifice (for car lease) and for tax credit calculations I can use 30K + 5K BIK =35K gross. Am I right?
Cheers

jamesd

Sorry, I don't know the tax credit rules, so I can't comment on that part.

zagfles

KB348 wrote: »

Thanks for your reply Jamesd. Both pension and car lease offered by employer.
it means out of 38K gross, 3K deducted for pension and 5K for Salary Sacrifice (for car lease) and for tax credit calculations I can use 30K + 5K BIK =35K gross. Am I right?
Cheers

Basically, but there are other complications, see the answer on the benefits board.