Can I contribute more than £40K a year to my pension through salary sacrifice scheme?

IamWood

As a higher taxpayer, Can I contribute more than £40k to my work pension through my employer's salary sacrifice scheme?

jamesd

I have done. To do it you should have unused annual allowance in the previous tax years that you can carry forward to the current one. Both personal and employer contributions count towards the annual allowance, with salary sacrifice being treated as an employer contribution.

IamWood

Thanks, @jamesd.
I understand the £40K rule applies to lump-sum contributions. Does the £40K rule apply to monthly contributions through the work sacrifice scheme too?

MX5huggy

Your pay after salary sacrifice can’t be less than the minimum wage. 

michaels

IamWood said:

Thanks, @jamesd.
I understand the £40K rule applies to lump-sum contributions. Does the £40K rule apply to monthly contributions through the work sacrifice scheme too?

Yes, your annual allowance is 40k including any tax relief added to the pension regardless of where the contributions come from.  IF you have not used the full 40k in the previous 2 years you can carry forward the remainder and use it this year.
Other limits are you can not salary sacrifice below the national minimum wage and your total contributions in a year can not exceed your total (including employer pension contributions) earnings.

jamesd

40k is all contributions to a pension in your name regardless if who makes them and how they are made. Monthly and lump sums count.

Some glitches in michaels' reply:

1. You can carry forward for the previous three tax years, not just two.
2. Contributions by you as personal (not sacrifice) can't exceed your after sacrifice pay. Employer contributions, including the ones used for all salary sacrifice, don't count towards this limit. A lump sum might not be done as salary sacrifice so might count against this limit.

michaels

Thanks for the correction on carry forward years, I think we are saying the same thing on (2) just wording it differently.

jamesd

We were but you used "you can not salary sacrifice below " and "your total contributions in a year can not" and I thought there was a fair probability of confusion between employer salary sacrifice not subject to pay limit and non-employer contributions subject to pay limit.

No doubt that you know the difference, I was trying to ensure no misinterpretation.

michaels

Yes - my agreement with my employer is pretty flexible so they set my total remuneration and then I decide what proportion is employers pension contribution and what proportion is salary so I tend to think of it as a single pension payment rather than seeing pension contributions as separate bits the way most people do, hence your description being easier to understand than mine.

IamWood

Thanks to all. This is very helpful!

Marcon

michaels said:

IamWood said:

Thanks, @jamesd.
I understand the £40K rule applies to lump-sum contributions. Does the £40K rule apply to monthly contributions through the work sacrifice scheme too?

Yes, your annual allowance is 40k including any tax relief added to the pension regardless of where the contributions come from.  

In case anyone reads that sentence quickly and misreads it: there is no tax relief added to the pension in respect of employer contributions, whether or not these result from salary sacrifice.