Tax, personal allowance, minimum wage and pension contributions

Wellgood

Hi
My brother currently earns 14,000.00. Is it worth him making pension contributions to make his salary go under the personal allowance of 10,600.00 so he doesn't have to pay tax. Or will hmrc say he is earning below minimum wage salary of 12675.00(based 37.5 hr working week)?

jem16

Wellgood wrote: »

Hi
My brother currently earns 14,000.00. Is it worth him making pension contributions to make his salary go under the personal allowance of 10,600.00 so he doesn't have to pay tax.

Sounds like a good idea.

Or will hmrc say he is earning below minimum wage salary of 12675.00(based 37.5 hr working week)?

This wouldn't apply unless he was using salary sacrifice? If he's paying from gross or net salary then his gross salary doesn't change.

dzug1

On that level of salary can he afford to make extra contributions?

Wellgood

Jem, it would be via salary sacrifice. Does this mean he could not do it.? As it would raise questions from hmrc?

jem16

Wellgood wrote: »

Jem, it would be via salary sacrifice. Does this mean he could not do it.? As it would raise questions from hmrc?

You can't salary sacrifice below minimum wage.

Wellgood

So my brother has been doing monthly payments to his AVC via salary sacrifice for the last 3 months and have calculated it will bring his p60 taxable income to £12,100.00 by end of Mar 16. However it has been mentioned previously that you can not salary sacrifice below minimum wage rate So I am trying to calculate the National Minimum Wage figure for this tax year


For a 37.5 hour week - Would it be
(£6.50 x 37.5hrs week x 52 weeks = £12,675.00?)


(With Rate change in Oct 15 = this would change to (£6.50 x 37.5hrs week x 26 weeks = £6,337.50 plus (£6.70 x 37.5hrs week x 26 weeks = £6,532.50) Total = £12,870.00?)




If this is the case - why has no one stopped him from doing the AVC's as on current basis he will be salary sacrificing below NMWR? What happens if he accidentally did do it under NMWR? (Obviously he does not want to do this and is why I am trying to figure it out for him)