Salary Sacrifice Advice / Maximising my pension contributions

[Deleted User]

Hi there -
I'm wondering if anyone can help. I am in the position that I would put quite a lot in to my pension and I'm trying to work out the most tax efficient way of doing this. Background - I'm 37 with a small pension pot currently. Our position has changed recently and both mine and my husbands take home has increased a lot. I don't want to get used to the additional income and risk lifestyle inflation, I'd rather lock it away if possible. Also my husband is self employed and therefore can get less pension advantages than I can as employed. We have a mortgage of £97k and no intention of moving in the next 7 years. We are about to switch our deal on to a 10 year fix and will be continuing to overpay to pay it off in the 10 years so no issues with this. We have no debt and a good sum in emergency savings fund.

Basic situation is I'm part of a small company. Salaried at £40k with a potential £8k bonus per year paid quarterly. I have also just been made a shareholder so all being well I will have dividends as well. The company are happy to try and help me maximise the package to suit re bonus etc.

My question is - is there a limit on salary sacrifice amount (except for minimum wage requirement). I am considering salary sacrificing 47% of basic salary (employer contributions are currently an additional 3%). According to calculators after student loan this would leave me a take home on basic of £1491 and a pension contribution with employers of £1667. This should then be allowed as I would still get tax relief as it's not more than my salary per year? 
I then believe any bonus and dividends are less likely to creep in to higher tax brackets and I will take that back as normal pay then.

Is there a better way of doing it? Would it be better to look at asking to sacrifice any bonus and dividends and have these paid as pension contributions instead?

Any help would be gratefully received. 

Many thanks

zagfles

Should be fine, sal sac is limited by minimum wage which looks like you'll be above, and looks like you'll be only using about half the £40k annual allowance. Don't worry about the tax relief limit (100% of earnings) it's impossible to exceed that using sal sac.

It's actually better not to sal sac bonuses, because NI works on a pay period basis and if you exceed the NI UEL (4167 a month) you only pay 2% NI rather than 12% on the amount over £4167.

Albermarle

I am not sure about this point but I think you could not have  share dividends paid direct into the same pension as your salary sacrifice contributions as different tax rules apply.

Gary1984

Dividends are tax free for the first £2k and only 7.5% after that so already very tax efficient. I don't think you'd be able to salary sacrafice them anyway as they're not salary. 

zagfles

Sal sac contributions are company contributions, so if the company allowed you to waive them in return for a pension contribution that would be perfectly OK. But probably not tax efficient as above.

If you got paid the dividends, they would not count as earned income so you couldn't pay them into a pension (but obviously getting them might enable you to afford to pay more of your earned income in).