100% Salary Sacrifice

xylophone

On 1 April you gave 1032L as the tax code on your main job - was this for the tax year 14-15 or 15-16?

billchecker1

15-16 from the tax coding letter they sent me in the post.

jem16

billchecker1 wrote: »

My main job pays £39000 and has a tax code of 1032L which is a normal code plus a few allowances that I get.

If that's for 15/16 then the normal tax code is 1060L so you're getting less, not more.

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.

Your pension contributions from your 2nd job are being paid from net pay so are not reducing your taxable income. What should be happening is that you pay the 40% tax on some of it and can claim the extra 20% tax relief from HMRC.

What about your main job - is that £39k your taxable income after pension contributions are taken?

billchecker1

My mistake. My new code is different. Albeit only slightly to include the higher personal allowance.

The 39k is my gross salary.

So are you saying that even though I contribute all my 2nd salary. Then I have to pay 40% initially from it and then claim it all back? Seems a bit cack handed.


Surely with the setup I have now will result in the same amount of tax due anyway? Sorry I am very confused!

jem16

billchecker1 wrote: »

My mistake. My new code is different. Albeit only slightly to include the higher personal allowance.

The 39k is my gross salary.

So your taxable pay will be less.

So are you saying that even though I contribute all my 2nd salary. Then I have to pay 40% initially from it and then claim it all back? Seems a bit cack handed.

It's the way PAYE works though.

Surely with the setup I have now will result in the same amount of tax due anyway? Sorry I am very confused!

Quite possibly but you would need to sit down with the figures.

xylophone

http://taxaid.org.uk/guides/information/issues-for-employees/employee/paye-with-two-jobspensions

https://www.moneyadviceservice.org.uk/en/articles/pay-and-tax-when-working-in-more-than-one-job

http://www.retirementplanner-sw.com/digital_assets/15896/Relief_at_source_and_net_pay_-_avoiding_confusion.pdf

Do you have a P60 for 14-15 for each job?

billchecker1

That all makes sense thanks. This until I rang the tax office who had a look at my codes and told me that it is all in order. Again they tried to give me a nil code for my tax on my second job.

jamesd

billchecker1 wrote: »

So are you saying that even though I contribute all my 2nd salary. Then I have to pay 40% initially from it and then claim it all back? Seems a bit cack handed.

Right. At least formally. But if you just tell HMRC that you're getting all of the net pay paid into a pension contribution and ask them to send that employer a BR tax code to reduce the error in tax collected they may agree, since it also makes their life easier.

You're right that your current setup of BR on the second job and basic rate relief provides the correct income tax result. The problem is that HMRC will notice the two jobs, link them and conclude that you owe some higher rate income tax on the second job's income. Unless you tell them about the pension contributions. So tell them. Then let them do whatever they want to sort it out, since it's their problem to sort out which is easiest for them.

jem16

billchecker1 wrote: »

My mistake. My new code is different. Albeit only slightly to include the higher personal allowance.

The 39k is my gross salary.

What are you paying for your police pension contributions? In an earlier thread you said it was £433pm but about to go up. If you take £433pm that's £5196pa.

That will then reduce your £39k gross to £33804. If you add on the £5k from the other job that's £38,804 which means you are not a higher rate taxpayer so BR is correct.

When you phoned HMRC did you give them your gross salary or your taxable pay? As far as HMRC is concerned £33,804 is what you need to quote for income from the Police as that is what is on your P60.

billchecker1

jamesd wrote: »

Right. At least formally. But if you just tell HMRC that you're getting all of the net pay paid into a pension contribution and ask them to send that employer a BR tax code to reduce the error in tax collected they may agree, since it also makes their life easier.

You're right that your current setup of BR on the second job and basic rate relief provides the correct income tax result. The problem is that HMRC will notice the two jobs, link them and conclude that you owe some higher rate income tax on the second job's income. Unless you tell them about the pension contributions. So tell them. Then let them do whatever they want to sort it out, since it's their problem to sort out which is easiest for them.

Brilliant. Thanks James. That makes my first call the them a lot clearer.

In short: I was sent a coding notive a few months back which was extrememly low, presumably to take into account both jobs. I explained to them both my salaries and that I was going to pay all of my second income into a pesnion and they said that this was the best way forward as I still pay all the tax due.

Thanks for your response.