Income below tax allowance

WYSPECIAL

Tried searching the internet but get conflicting answers so any help appreciated.

As it stands my earnings for 2019-20 will be less than my tax code allowance so I won't pay income tax.

What is the maximum I can pay into my pension schemes and get tax relief. Is it £2880 or is it up to 100% of my taxable earnings (which don't reach the threshold for tax)?

My employers pension uses salary sacrifice does this count towards the total? As a non-taxpayer I won't benefit from a tax saving on these contributions but will save 12% NI.

Can I roll back entitlement that I didn't use in previous years to increase my contributions?

I'm trying to work out if it is best to salary sacrifice the minimum amount to get the maximum employers contribution or better to pay the total I'm allowed into a SIPP and get the tax relief added.

MallyGirl

You cannot salary sacrifice yourself below the national minimum wage which will be a limitation here. You could pay into another pension as well to maximise total contributions up to your earned income (not taxable income) and you would benefit from tax relief even though you haven't paid any.

WYSPECIAL

MallyGirl wrote: »

You cannot salary sacrifice yourself below the national minimum wage which will be a limitation here. You could pay into another pension as well to maximise total contributions up to your earned income (not taxable income) and you would benefit from tax relief even though you haven't paid any.

Cheers,

I currently salary sacrifice 10% which my employer matches. This leaves me above NMW and still paying NI.

I can reduce my salsac to 5% and my employer would still pay 10%. On my current contractual hours this would still leave me below tax threshold. Would this be more efficient as I could get 20% tax relief by paying into a SIPP rather than just 12% NI saving?


Or if the salsac doesn't count towards the annual limit can I do both?

michaels

Sal sac does count towards the limit but the amount sal sac'd counts as part of your income in terms of the not exceeding earned income rule.

I do sal sac below the tax threshold but that is because as well as the employees NI saving the employer also gives me 2/3rd (about 9.6%) of the employer NI saving so together these are pretty much the same as the 20% uplift I would get on a sipp.

Haven't doen the maths but for you it sounds like the best bet is as you say, sal sac the min to get your full employer contribution and then use a sipp for any other contributions (total you pay into sipp plus tax refund less than or equal to your gross pay excluding sal sac)

Paul_Herring

What is the maximum I can pay into my pension schemes and get tax relief. Is it £2880 or is it up to 100% of my taxable earnings (which don't reach the threshold for tax)?

The latter.

My employers pension uses salary sacrifice does this count towards the total? As a non-taxpayer I won't benefit from a tax saving on these contributions but will save 12% NI.

I currently salary sacrifice 10% which my employer matches.

Subtract /your/ sacrifice (do not include employer's contribution) from your gross wage to get the taxable earnings amount from your previous question.

So, e.g.
Salary: £12,000
Sacrifice: 10% => £1,200
Taxable: £10,800 (but not actually taxed. Will have NI of £285 deducted though)

Pay £8,640 (80% of £10,800) of that net into personal pension, get a rebate of £2,160 (25% of £8,640 or 20% of £10,800,) for a total of £10,800 into the pension.

Yes, you'd get a tax rebate on wages not actually taxed.