Salary sacrifice and minimum / working wage query.

pensionpawn

I've just read that it is not allowed to sacrifice below minimum / working wage. However at almost £8 / hour that's ~ £15k5! We were hoping to SS the wife down to the tax threshold (and maybe further in time to recover NI at 12%), so is that not allowed?

Dazed_and_confused

Sounds like an opportunity for her to go part time

Triumph13

No you can't go below minimum wage.
No you wouldn't WANT to go below tax threshold (unless she had other taxable earnings outside the job). Why would you want to sacrifice to get 12% relief when you could contribute to a personal pension and get 20% relief?

thickasabrick

You can still make pension contributions up to 100% of your annual earnings and get tax relief (up to the annual allowance) . Just do it outwith the salary sacrifice scheme.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
You can get tax relief on private pension contributions worth up to 100% of your annual earnings.

https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye
A salary sacrifice arrangement can’t reduce an employee’s cash earnings below the National Minimum Wage rates.

pensionpawn wrote: »

I've just read that it is not allowed to sacrifice below minimum / working wage. However at almost £8 / hour that's ~ £15k5! We were hoping to SS the wife down to the tax threshold (and maybe further in time to recover NI at 12%), so is that not allowed?

pensionpawn

Surely the tax relief will then be applied at destination?

pensionpawn

Thanks for that. In fact you've just reminded me that I think her salary sacrifice is limited to her 10% contributions, which are matched by her employer, and I was actually getting sightly muddled with her AVC, which she already does at a considerable level, which of course we could increase. However on her payslip that is shown to work in exactly the way that her salary sacrifice does, reducing her tax liability, hence if her AVC increases to decrease her taxible pay to the basic allowance we surely reduce her income tax to zero? Hence it got be thinking that if we increase her AVC even further it would recover NI at 12% down to the primary threshold, however as posted above, would she lose out on the 20% rebate, or would that be applied at destination? Tricky stuff at times this pension business! Just trying to 'sweat the assetts'!

kidmugsy

I'm surprised to learn that her AVCs avoid NICs. Are you sure?

MallyGirl

My employer calls anything I contribute over the standard 5% (to get their 10%) an AVC. It goes in via sal sac and so saves tax and NI

tigerspill

I hit this last month when I tried to dump as much as I could into my pension. My company then adjusted this to the maximum allowed.

Dox

pensionpawn wrote: »

Surely the tax relief will then be applied at destination?

For personal contributions yes, if it's a relief at source scheme.

Payments made via salary sacrifice are technically employer contributions so don't have tax relief added (although they do qualify for corporation tax relief).

michaels

Good thing is that by doing it as an avc from your taxed income is that you get the tax relief even on contributions that take you below the personal allowance on which you never actually paid tax in the first place - so sure you lose the in advantage of ss but gain 20% tax relief on tax you never paid.

However there is still annual allowance and max contribution of earned income to bear in mind.