Salary sacrifice and effect on annual pension contribution limit

someone

Something to look at, is SS going to be successfully applied given HMRC say

> As a general rule, if an employee swaps between cash earnings and a non-cash benefit whenever they like, any expected tax and National Insurance contributions advantages under a salary sacrifice arrangement will not apply. There are some exceptions to this, Employment Income Manual 42755 gives more information.

https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

Employment Income Manual 42755 seems to say the income tax part might not matter as it's a pension. But it does not go into what happens on the National Insurance contributions.

MX5huggy

It does say what happens to NI

Tax and National Insurance contributions exemptions on non-cash benefits

Exemptions on benefits in kind do not apply to salary sacrifice schemes. The only benefits you do not need to value and do not have to report to HMRC for a salary sacrifice arrangement are:

• payments into pension schemes

Then it gives an example 

£5,000 employer contribution to registered pension scheme

No employment income tax or National Insurance contributions charge to the employee - the full amount is invested in the pension fund

jamesd

Yes, your second paragraph is correct. Keep the gross sacrifice total (your sacrifice plus all employer bits) plus the grossed up personal contribution to the 70k target, or a touch over if you still have carry-forward from a later year available.

There are no horrible consequences for going over limits. If you go over salary you just ask the pension firm for a "refund of excess contributions lump sum" within six years. If you go over the available AA and carry-forward you get to tell HMRC so they can charge you tax on the excess.

Yes, your OH can use carry forward any time that there is the potential to get to over 50k. If she's employee of her own company then company contributions are likely to be best since they are effectively salary sacrifice for the business, saving it corporation tax.

jamesd

someone said:

Something to look at, is SS going to be successfully applied given HMRC say

> As a general rule, if an employee swaps between cash earnings and a non-cash benefit whenever they like, any expected tax and National Insurance contributions advantages under a salary sacrifice arrangement will not apply. There are some exceptions to this, Employment Income Manual 42755 gives more information.

https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

Employment Income Manual 42755 seems to say the income tax part might not matter as it's a pension. But it does not go into what happens on the National Insurance contributions.

Readers can and should just ignore your post. It doesn't apply to pensions because it is incompatible with the auto-enrollment pension rules, which require the ability to stop and start without regard to life events. This would have made sacrifice incompatible with almost all workplace pensions. So back in around 2014 HMRC changed the rules and now changes to pension contributions in salary sacrifice are permitted at any time without regard for life events.

NI is no different from income tax for this purpose. So long as it's pensions you can change whatever you like as often as you like and get all of the expected sacrifice benefits.

There are occasionally cases of companies saying it's not allowed. That's untrue in law but their scheme rules or convenience might not allow it. In which case asking them to catch up with changes made seven years ago might be one approach to consider.

What I've written here only applies to pensions. Other sacrifice uses are subject to the life events and related restrictions.