Salary sacrifice & NI

Albermarle

michaels said:

MallyGirl said:

The only thing you might be able to do - if your systems allow it - is to sal sac down to NMW one month (and pay little or no NI) and then change the contributions amount to be lighter the following month. I can change my contributions as often as I like online but not everyone has that option. The tax will sort itself out as it is annual

Given you are only working a few months it might be worth Sal sac to NMW for the whole of the tax year if your pension is going to be taxed at 20%, only being 3 months you shouldn't run into annual allowance issues and you can get 25% as a tfls.  Might even be worth adding the remainder of your income into a sipp as you will get the tax back even though you never paid it in the first place (personal allowance) and again you can get the 25% TFLS so a 5% boost overall.

Good idea but I am very likely to hit the LTA . I have continued to make full contributions this year due to the 40% tax relief as at least if I do have to pay LTA charge I haven't actually lost anything . However would not make sense to add more to the pension than necessary to get employer contributions next tax year, and get only basic rate relief. 

garmeg

Albermarle said:

zagfles said:

No. NI works on a pay period basis, not an annual basis.

I thought that might be the case but 'good' to have it confirmed .
he only thing you might be able to do - if your systems allow it - is to sal sac down to NMW one month
Only allowed to change once a year but thanks for the idea anyway .
Tax wise , I will just leave it as it is and claim a refund later .

Work out which month you are going to retire after April. Then half way between April and that month, increase your sacrifice to NMW?

You wont need to change again as you are retiring.

zagfles

michaels said:

MallyGirl said:

The only thing you might be able to do - if your systems allow it - is to sal sac down to NMW one month (and pay little or no NI) and then change the contributions amount to be lighter the following month. I can change my contributions as often as I like online but not everyone has that option. The tax will sort itself out as it is annual

Given you are only working a few months it might be worth Sal sac to NMW for the whole of the tax year if your pension is going to be taxed at 20%, only being 3 months you shouldn't run into annual allowance issues and you can get 25% as a tfls.  Might even be worth adding the remainder of your income into a sipp as you will get the tax back even though you never paid it in the first place (personal allowance) and again you can get the 25% TFLS so a 5% boost overall.

But be careful - sal sac reduces qualifying earnings for NI so if OP needs another qualifying year for the state pension, 3 months at NMW won't provide it, but 3 months at the higher rate threshold will.