Potential New flat rate relief and Salary Sacrafice

zagfles

Snakey wrote: »

Hmm. My current salary sacrifice is set up to use up some brought forward relief (which will be used up by the end of 2016/17). If it gets grandfathered, I assume that means I wouldn't be able to change it - even downwards - and so I'd be stuck with exceeding my annual allowance every year for evermore (or go on to the new rules tax relief, whatever they may be) - which would be doubly bad in terms of overall tax rate since I'd end up breaching the LTA at this level of contributions too.

Interesting times, indeed.

I did speak to the payroll manager at work to confirm that she doesn't press the button for March's salaries until after the Budget date. So at least there is scope to run across the office waving my arms, should the Chancellor pull any "on or after today" shenanigans, and get all future contributions stopped.

They might stop new sal sacs or increases to sal sac but I doubt they'd stop reductions in sal sac. That would make no sense at all. Yes, yes.. I know...

jamesd

zagfles wrote: »

I don't think most public sector scheme use sal sac do they? Certainly people I know in public sector schemes have employee conts deducted via net pay (ie no NI saving).

There's a large component from the employer in addition to the parts reported to the employees. That large employer part is in effect salary sacrifice where the employment contract never offered the chance to take the money instead.

The employees could be more appropriately taxed on the increase in the value of their DB benefits each year rather than trying to tax the employer part somehow. That way the employees are taxed on the benefit they receive. The disadvantage of this approach is that unlike pay there's no employer or employee NI charged, so more money might be raised by using the payroll-based method.

zagfles

jamesd wrote: »

There's a large component from the employer in addition to the parts reported to the employees. That large employer part is in effect salary sacrifice where the employment contract never offered the chance to take the money instead.

The employees could be more appropriately taxed on the increase in the value of their DB benefits each year rather than trying to tax the employer part somehow. That way the employees are taxed on the benefit they receive. The disadvantage of this approach is that unlike pay there's no employer or employee NI charged, so more money might be raised by using the payroll-based method.

Yes, but if they get taxed on it then they'll obviously get the flat rate relief on it too. Assuming it's set above 20% and below 40%, that would make basic rate taxpayers better off and higher rate taxpayers worse off.

jamesd

Except that there may be NI to pay and that would make basic rate tax payers worse off as well. Depends how it's handled.

farquarpigmix

jamesd wrote: »

Except that there may be NI to pay and that would make basic rate tax payers worse off as well. Depends how it's handled.

My head hurts.

zagfles

jamesd wrote: »

Except that there may be NI to pay and that would make basic rate tax payers worse off as well. Depends how it's handled.

There's virtually no chance of that. Taxable benefits don't currently attract employee NI.

farquarpigmix

Can someone please explain in easy to understand terms. How much will I get? So after taking £6,000 away leaves £17,000 I earn £22,000 a year.

Just a approx will be fine.

Snakey

zagfles wrote: »

They might stop new sal sacs or increases to sal sac but I doubt they'd stop reductions in sal sac. That would make no sense at all. Yes, yes.. I know...

That sounds like the right answer, but I have a feeling that technically you cannot amend a salary sacrifice arrangement (from a legal perspective, I mean. I suspect any change to the numbers may count as ripping up the old one and putting a new one in place, even if the wording and terms remain identical). So I'd be at the mercy of the wording of the legislation as to whether they close off the possibility by default - the draftsman may not have such a random situation in mind when under pressure to rush out the Finance Bill.

Anyway, minor point unlikely to be of interest to anybody except me. All those years I've yearned to be unique, and now I've managed it I'm still not happy...

Triumph13

Snakey wrote: »

Anyway, minor point unlikely to be of interest to anybody except me. All those years I've yearned to be unique, and now I've managed it I'm still not happy...

I hate to break it to you Snakey, but you're not unique. I've got a sacrifice taking me over the AA and relying on brought forward relief too. Just to add complexity I'm also due an age-related increase in employer contributions at my next birthday!

zagfles

Triumph13 wrote: »

I hate to break it to you Snakey, but you're not unique. I've got a sacrifice taking me over the AA and relying on brought forward relief too. Just to add complexity I'm also due an age-related increase in employer contributions at my next birthday!

Also sal sac is used for all sorts of other stuff, not just pensions. If they were to do anything to sal sac I doubt it'd be abolished at short notice, but they might say not allow new/increases in the pension sacrifice element.

But I doubt this either. More likely, if they go for flat rate, that employer conts would become a taxable benefit offset by the flat rate, so that would include sal sac, so no changes needed to sal sac rules.