Bonus sacrifice pension question

Neal12

Hi all, looking for some validation!

Current salary = £46,200
Pension contribution (salary sacrifice) = £227pm
Private medical tax amount = £47pm
Share Incentive Plan = £125pm
Dividend income £2,300
Tax code 1185l

In March it will rise to £48,200 and I will receive a £8K bonus.

I can’t work out exactly how much I’ll be paid in March but I assume this will definitely take me over the 40% tax rate for the year?

My company give us the option to sacrifice the bonus as a pension contribution. As this is taken before tax am I right that it wouldn’t be included and I could stay under the 40% threshold?

A bit confused on how it all works but don’t want to lose out on things like the savings allowance...:o

Linton

You are correct that if the bonus is paid into your pension it is not included in the tax calculation.

xylophone

https://www.gov.uk/tax-on-dividends

george4064

I'm due a one off bonus at the end of this year, I have been issued a letter from my company confirming the bonus etc. However there is no mention of bonus sacrifice (to pension).

Is this something I can request? I'd much rather bonus sacrifice to my pension than get taxed, back into pension and get back tax relief.

Thanks in advance.

cloud_dog

Hi

There are two distinct things here... Salary Sacrifice and making pension contributions to reduce your taxable income.

Salary Sacrifice is a employer payment scheme whereby you agree to reduce your salary, as in sacrifice some of it, and the company agrees to make a corresponding payment so that you are no worse off (in fact much better off). This is usually used for pension contributions as they are a known amount (percentage) and can be paid directly from the employer in to an 'account' in your name (pension).

Pension contributions (within your payroll) usually reduce your taxable income.

Regarding your query you will need to ask your payroll or HR department if this is something they can/will do for you.

george4064

cloud_dog wrote: »

Hi

There are two distinct things here... Salary Sacrifice and making pension contributions to reduce your taxable income.

Salary Sacrifice is a employer payment scheme whereby you agree to reduce your salary, as in sacrifice some of it, and the company agrees to make a corresponding payment so that you are no worse off (in fact much better off). This is usually used for pension contributions as they are a known amount (percentage) and can be paid directly from the employer in to an 'account' in your name (pension).

Pension contributions (within your payroll) usually reduce your taxable income.

Regarding your query you will need to ask your payroll or HR department if this is something they can/will do for you.

Thanks for you reply.

I am aware of salary sacrifice, however I am purely asking about bonus sacrifice. In my normal annual bonus I am given the option to sacrifice a fixed value to my pension, however with this ad-hoc bonus I have not been given this option.

I will speak with payroll/HR to find out more, hopefully they get these queries a lot and won't think I'm being very 'pinickity' about all this. Also I hope they will keep it confidential as I'm not supposed to talk about my bonus to any colleagues.

cloud_dog

Ok.

Perhaps an approach to take would be to play it a little simple, i.e. enquire with HR or Payroll (depending on who deals with this stuff), that usually bonuses can be paid directly in to a pension, can ad-hoc bonuses be treated in the same way?

andykala

Hi,
I wanted to follow on this, as I am very confused right now of how to proceed.
I have had the luck of getting a well paid job and had a good sales year.
Annual Salary : 100,000 GBP
Salary Sacrifice this tax year (started late to put 5%): 3500 GBP
Employer contribution to Pension: 10,000 GBP
Estimated Bonus: 65,000 GBP
Benefits (dental/med) per month: ~100 GBP
I have no other incomes, dividend etc.

As I understand I have an Annual Allowance of 40,000 GBP to put in pension, combined Salary Sacrifice and Employer contribution. We have been approached by my employer to do bonus waive (sacrifice), but I have no idea of what to do?
I have read a lot but seems very complicated to figure out how much I can put in pension and my actual limit, or if it is worth it? How much should one put away?
Sorry for being lost in this, but any input would be very helpful!
Thanks,
AK