Salary Sacrifice - Too good to be true?

Theta101

Love that camelopardis!

6022tivo

I don't think my company considered the minimum wage, although my calculations have put my wage at 6p over it.

The negatives I don't think are considerable, the company always uses my reference salary before salary sacrifice, including on the 2.5% annual increase letter I've just got. Yay!

One maybe the mortgage, but the mortgage company only normally require three payslips, so you could get the company to drop salary sacrifice for a few months, and then go back if it becomes an issue.

It's an amazing perk that the Government will have to look at in future.
Paying no income tax comrades, it's the way forward.

pjcox2005

kangoora wrote: »

In this instance you tell your potential new employer what your salary is un-adjusted for salary sacrifice.

It's a perfectly true statement as you *could* stop salary sacrifice at any time and recover your full wage.

Your previous company would never divulge your compensation package to any possible competitor (presumably you are staying in the same work arena). The only way I think you could be caught out is if someone in accounts noticed your taxation would be in a lower band than expected - but why would they ever look and compare that?

A long time ago now I had something similar work in my favour. I changed jobs and told my potential new employer I was on £24k but 'sensible overtime' was included in that (I'd recently gone from £19k +OT to £24k without any OT payable). My new firm offered me £27k + OT, so either they really wanted me or it had gone in one ear and out of the other so they had me noted down at £24k as 'previous' salary and just offered a nice 10% raise - it was actually about a 33% rise in the first year due to overtime

More likely, if the new employer doesn't offer the same value on pensions you should be adjusting your gross salary (i.e. pre-salary sacrifice for pensions) up for the NI and employer pension contributions lost so that you don't lose out on shifting jobs.

ColdIron

6022tivo wrote: »

Paying no income tax comrades, it's the way forward.

If you don't use salary sacrifice you don't pay income tax either as your pension provider will automatically rebate the basic rate portion and if you are a higher rate taxpayer you can claim that part back via self assessment or a changing your tax code. The principle benefits are reduced employee NICs, possibly a slice of employer NICs and ease of administration for a higher rate tax payer

greenglide

ease of administration for a higher rate tax payer

As long as pension contributions are taken before tax then the higher rate tax isnt a problem.

The extra allowance is only an issue if the contributions are taken after tax and the pension provider is reclaiming the basic rate tax.

ColdIron

But surely this is the nature of salary sacrifice, your contributions are always pre tax

6022tivo

ColdIron wrote: »

But surely this is the nature of salary sacrifice, your contributions are always pre tax

Yes, this is why I'm confused about the above posts.
Contributions are before tax, and the pension pot is not liable for tax. Hence it's a win win win.

You are saving 20% + NI x 2 on the sacrifice, if a standard income tax payer.

ColdIron

6022tivo wrote: »

Yes, this is why I'm confused about the above posts.
Contributions are before tax, and the pension pot is not liable for tax. Hence it's a win win win.

You are saving 20% + NI x 2 on the sacrifice, if a standard income tax payer.

Perhaps we misunderstand each other or I missed the context of your post. If your point is that pension contributions (however funded) are a win because you pay no tax on contributions or gains whilst within your pension I agree, they are great. They are designed to encourage people to make provision for their retirement, hence the tax break. The point I am making is that there is no income tax advantage with pre-tax SS contributions over post-tax contributions. If your contributions are post-tax the tax paid can be reclaimed and with SS they are pre-tax so there is nothing to reclaim. The net result is the same. The monetary advantage of one over the other lies within the National Insurance reduction. Apologies if I have introduced an element of confusion