100% Salary Sacrifice

jamesd

BR is probably right, not sure. Need to know how much money was paid into the pension and how that compares to the amount taken from pay. Once we know that we'll know whether you got the basic rate tax relief added.

Then you can call HMRC and tell them the gross pension contribution, the amount that ends up in the pension, and they will adjust your tax codes to deal with things properly so you don't pay higher rate tax. My guess is that they will leave the second job on BR and adjust the first one.

billchecker1

zagfles wrote: »

It's still not making sense. If you pay 100% into your pension how are they deducting tax? Your take home would be negative, did you pay them on payday?? What does your payslip look like?

Sorry for the late reply.


I had requrested that 100% of my pay go into my pension when I signed up for the scheme and spoke to the administrator who said that it was ok.


My pay slip looks like this:


Total Pay: £374.92
PAYE: £75
NI: £0
Pension: £299.92
Employers pension contribution: £22.50
Employers NI contribution: £0


Many thanks for your help

jem16

billchecker1 wrote: »

Total Pay: £374.92
PAYE: £75
NI: £0
Pension: £299.92
Employers pension contribution: £22.50
Employers NI contribution: £0

You're paying from net pay so tax was taken on the full gross pay using the BR tax code so 20% tax taken.

Has your pension provider added on £75 as the basic rate tax relief? This is what I would expect to have happened.

If this is the case then you do not need to claim tax relief unless you are a higher rate taxpayer.

billchecker1

Hi Jen and thanks for your answer.


I went and registered to Aviva and yes it DOES show the tax relief added back on! Sorry this was my ignorance on the matter, I suppose it seems odd that it is deducted and then added back on but with my other pension being final salary/DB ive never seen this done.


On a side note, with being allowed to put 100% in -no tax or NI, the employer adding 6% and a few percent of dividends, then just that alone will mean a very healthy amount over the next 20 years. That's without the added bonus of capital growth.


Am I missing something!?

jem16

billchecker1 wrote: »

Hi Jen and thanks for your answer.


I went and registered to Aviva and yes it DOES show the tax relief added back on! Sorry this was my ignorance on the matter, I suppose it seems odd that it is deducted and then added back on but with my other pension being final salary/DB ive never seen this done.

That's the normal way for it to be handled with non-occupational pensions.

On a side note, with being allowed to put 100% in -no tax or NI, the employer adding 6% and a few percent of dividends, then just that alone will mean a very healthy amount over the next 20 years. That's without the added bonus of capital growth.


Am I missing something!?

The nil NI is nothing to do with the pension contribution but to do with the earnings being below the lower earnings limit so no NI is due.

Employer contributions should never be turned down.

kangoora

You need to check that your other job pays you enough to qualify for a full NI contribution towards your state pension.

I'm kind of assuming that your first job pays much more than your 'second' job which is Saturday's only it seems, in which case you should be fine.

billchecker1

Yes. I pay full NI contributions on my main job.

Another question then Jen: my gross salaries combined are more than the higher rate threshold. My main job is just below it. I have told HMRC this. So shouldn't they take off 40% and recredit rather than 20%?

greenglide

If the main employment is taxed at 20% and only the second employment takes you over 40% then HMRC can either give you a BR or a 0T code for the part time employment (causing an underpayment) or use a K prefix code (it is, effectively a negative free pay) that can roughly balance out the under payment.

If the complete 20% band is used up in the main employment it becomes simple - they use a D code for the part time employment.

jem16

billchecker1 wrote: »

Another question then Jen: my gross salaries combined are more than the higher rate threshold. My main job is just below it. I have told HMRC this. So shouldn't they take off 40% and recredit rather than 20%?

In a case like that I would expect HMRC to allocate a BR tax code to the 2nd income and adjust your main tax code to collect the extra tax due. If they are not doing that then you are underpaying tax.

The other option would have been to allocate the 2nd job a D0 tax code which would collect tax at 40% but this would see you overpaying tax.

Has HMRC adjusted your main tax code?

billchecker1

My main job pays £39000 and has a tax code of 1032L which is a normal code plus a few allowances that I get. With some bonuses I should not go over the higher rate band.

My part time job is BR. And whilst variable will be around £5000 over the year.
I don't think I am underpaying on this basis? As I am putting all the salary from my part time job in my pension then surely my taxable income stays below the higher rate band?

Ps I did ring HMRC but they didn't fill me with confidence.