Salary Sacrifice vs Pay in from Net: End of year difference

MJB

AnotherJoe wrote: »

No! When you do your tax return, you should not enter your company pension contributions.
If you do you would indeed get "double bubble" until it was discovered and you were fined.

MJB wrote: »

But isn't that the salsac bit, not the 8K i'd have paid from net?

I'm talking about my second option in OP here.

8k from net, NOT salsac.

AnotherJoe

MJB wrote: »

I'm talking about my second option in OP here.

8k from net, NOT salsac.

Ah I see.
In that case, yes you put £10k down on the form, but if you are on 20% tax, they dont uprate it or take any money off your tax.
Otherwise it would be double bubble.
If you are paying higher rate tax, they would then give you back £2k off your tax, meaning the cost to put that £10k in was effectively £6k.

Exactly the same as if you'd put £10k into your employers scheme and not paid £4k tax (40%) on it (because if you paid that tax you'd get £6k in your salary)

Ciprico

MJB wrote: »

Yes, but I understand that when I do my tax return for that year, I declare the gross pension added in (10K in this instance) and then get 20% tax relief on that, so 2k back again?
I think others agreed with that so is that right?

You always put the gross pension contributions on tax returns. So in your example, the 8k you contribute + 2k tax relief = 10k.

The confusing bit may be:

For 20% tax relief you don't get any money back, but 20% more magically appears in your pension.

For the extra relief for HRT, you do get money back - (or rather pay less tax, which boils down to the same thing)

HMRC do this as majority of people don't do SA or earn above 43k, so very simple for them to make pension contributions with no involvement from HMRC


The process is much simpler through Salsac, as you essentially have a lower salary to begin with, so pay less tax...

So apart from the 2% benefit and effortless HRT relief - I like the fact that Salsac requires no contact with the tax office - which I always find extremely painful and tedious....