Salary Sacrifice Rules

DoctorStrange

I've been running my own LtdCo, paying minimum salary and divs up to the 50k mark and leaving the rest in the company account. 

I've been offered a job with a bigger firm which I'm considering, and would obviously be on their payroll if I accept.

I haven't been paying into my SIPP  so I have unused allowances, and I believe I can carry forward £40k from the each of the 2018/19, 2019/2020, and 2020/21 tax years.

If this is correct, is there anything to stop me paying the first £120k of post-April earnings into the SIPP?

I'm aware I still need to take home at least the minimum wage, but I'm unsure whether I can carry forward the full £40k from tax years where my salary was only £8k?

TIA

p.s. the bigger firm isn't any of my current/previous clients, so no IR35 considerations.

[Deleted User]

Maybe more appropriate for the Pensions board?

hugheskevi

DoctorStrange said:

If this is correct, is there anything to stop me paying the first £120k of post-April earnings into the SIPP?

It is correct. Nothing to stop you paying in the first £160K (including 2021/22 allowance), aside from earning sufficient amount to get tax relief on. Might want to consider if there are any Lifetime Allowance implications.

You may however wish to keep some carry-forward in reserve, if you would get a higher rate of higher putting in additional contributions over a number of years (eg ensuring you benefit from at least higher rate relief on everything)

You could also consider making an employer contribution from your Ltd company (possibly in 2020/21), depending on how you plan to extract funds from it.

I'm aware I still need to take home at least the minimum wage, but I'm unsure whether I can carry forward the full £40k from tax years where my salary was only £8k?

It does not matter what your salary was, you can carry forward the full £40,000.

DoctorStrange

Thanks hugheskevi 

I thought I'd read something about needing to earn at least what you're sacrificing but I've probably misread / misremembered that somewhere.

Is a good point re keeping some in reserve as well,  it's difficult to know how things will play out but I'll bear that in mind. 

I'm not planning on making contributions from my LtdCo just now,  as my current plan is to treat the company as a kind of "half-wrapper" i.e. I take a 20% hit now, in return for being able to access the funds before I'm 55 and reduce my LTA issues. That could change depending how things go though.