Employer Tax Treatment on SIPP Contribution

janel

My company pays 5% of my salary into a personal pension - in my case a SIPP.  I am a higher rate tax payer and this is the first contribution the company have made.  Basically they calculated 5% of my salary and sent it off to the pension company with no tax treatment.  Could anyone advise on the way this should have been treated as I currently have no reduction of tax in my salary or additional tax top up into the pension.
I would be grateful for any advice.

Dazed_and_C0nfused

If this is an employer contribution there is no pension tax relief due.

Have you done this as salary sacrifice (maybe called smart pension)?

bowlhead99

janel said:

My company pays 5% of my salary into a personal pension - in my case a SIPP.  I am a higher rate tax payer and this is the first contribution the company have made.  Basically they calculated 5% of my salary and sent it off to the pension company with no tax treatment.  Could anyone advise on the way this should have been treated as I currently have no reduction of tax in my salary or additional tax top up into the pension.
I would be grateful for any advice.

The company are giving you 5% pension contribution out of their own money.

They are giving it to your pension scheme for you. 

As it's going from your employer to a pension scheme, rather than into your pocket as cash, there is no need to pay income tax or NI on it. You would pay tax at marginal rates when you withdraw it from your pension in later life.

If they have agreed to make a contribution of 5% of your salary to a pension, ("My company pays 5% of my salary into a personal pension")
then it seems that's exactly what they have done, and that action won't change the tax you pay on the salary you get, or your net pay.

- there is no reason for the action of them sending a sum of money equal to 5% of your salary into a pension, to change the tax on your salary, as presumably you are still getting a salary outside the pension and paying your normal taxes on it.

- there is also no need for the pension company to go and claim extra tax relief on the money that arrives in the pension pot, because it was not being paid into the pension pot out of your taxed income, so you don't need to have 'relief' from the burden of taxation because they're hadn't been any taxation. The money was just paid from your employer directly to your pension without any tax being withheld.