Balance between Pension/S&SISA/cash

noclaf

Albermarle said:

noclaf said:

HCIMbtw said:

noclaf said:

tebbins said:

Student loan repayments are on your gross salary, before pension contributions unlike income tax.
Using MSE income tax calculator, with a Plan 1 loan and upping your pension contributions to 26%, would leave you with £2.7k per month take home.

Edit: I did not know salary sacrifice was treated differently, every day's a school day.

Hi Tebbins,

So my pay setup is slightly complicated in that my base is actually circa £57,600 and I then receive an allowance on top that takes my standard gross pay(not including bonuses) to just under £63k. The allowance can be used to buy various benefits or taken as cash, I take the vast majority as cash and in fact I will be taking all as cash for next year.
The pension % via salary sacrifice is based on the £57.6k rather than the gross £63k including allowance. That's just how my employer have setup the pension. I also received a pay rise in September.
So as long as my taxable pay come March 2023 payslip is £50,000.00 or less would that mean I would still be eligible(or my wife actually) for full child benefit?
Additionally, would I need to complete a annual self assessment if we claim for child benefit? I've never completed one in my life so thought I'd ask

Am in a similar boat to yourself, albeit a bit earlier life with slightly less in pension

Yep would need to complete a self assessment tax return, doing the same myself for the first time this year 

Earn just over 60 before tax and ensure pension contributions take me down to just about £49,800 ish so we can claim child benefit... only curve ball is if I happen to earn a decent bonus.. which is very rare, but possible.. would kinda scupper my plans and would end up having to pay back some child benefit I assume

Anyone any advice on how to deal with that as a potential issue? should I set up an emergency SIPP 

Was also interested in the comment regarding NI credits for spouse, assume she wouldn't need to claim those while getting statutory maternity pay? 

The self assessment part puts me off, is there anyway to avoid it? Also would interest generated on current/savings accounts (albeit pretty rubbish on my cash accounts at present) count towards my annual income?

HMRC are slowly moving away from self assessment and more people are using their on line personal tax account , or just communicating with HMRC when issues crop up .
Although in my opinion SA was/is better.
A basic rate taxpayer can earn up to £1000 in interest tax free . A higher rate taxpayer can earn up to £500.
Presumably if you sal sac below £50K , you can earn up to £1000 , although I am not 100% sure.

In some respects SA might not be a bad thing for myself, I've been a carer for quite a few years and manage my mum's finances so it could be useful to ensure I can explain all transactions etc

MX5huggy

noclaf said:

Albermarle said:

noclaf said:

HCIMbtw said:

noclaf said:

tebbins said:

Student loan repayments are on your gross salary, before pension contributions unlike income tax.
Using MSE income tax calculator, with a Plan 1 loan and upping your pension contributions to 26%, would leave you with £2.7k per month take home.

Edit: I did not know salary sacrifice was treated differently, every day's a school day.

Hi Tebbins,

So my pay setup is slightly complicated in that my base is actually circa £57,600 and I then receive an allowance on top that takes my standard gross pay(not including bonuses) to just under £63k. The allowance can be used to buy various benefits or taken as cash, I take the vast majority as cash and in fact I will be taking all as cash for next year.
The pension % via salary sacrifice is based on the £57.6k rather than the gross £63k including allowance. That's just how my employer have setup the pension. I also received a pay rise in September.
So as long as my taxable pay come March 2023 payslip is £50,000.00 or less would that mean I would still be eligible(or my wife actually) for full child benefit?
Additionally, would I need to complete a annual self assessment if we claim for child benefit? I've never completed one in my life so thought I'd ask

Am in a similar boat to yourself, albeit a bit earlier life with slightly less in pension

Yep would need to complete a self assessment tax return, doing the same myself for the first time this year 

Earn just over 60 before tax and ensure pension contributions take me down to just about £49,800 ish so we can claim child benefit... only curve ball is if I happen to earn a decent bonus.. which is very rare, but possible.. would kinda scupper my plans and would end up having to pay back some child benefit I assume

Anyone any advice on how to deal with that as a potential issue? should I set up an emergency SIPP 

Was also interested in the comment regarding NI credits for spouse, assume she wouldn't need to claim those while getting statutory maternity pay? 

The self assessment part puts me off, is there anyway to avoid it? Also would interest generated on current/savings accounts (albeit pretty rubbish on my cash accounts at present) count towards my annual income?

HMRC are slowly moving away from self assessment and more people are using their on line personal tax account , or just communicating with HMRC when issues crop up .
Although in my opinion SA was/is better.
A basic rate taxpayer can earn up to £1000 in interest tax free . A higher rate taxpayer can earn up to £500.
Presumably if you sal sac below £50K , you can earn up to £1000 , although I am not 100% sure.

In some respects SA might not be a bad thing for myself, I've been a carer for quite a few years and manage my mum's finances so it could be useful to ensure I can explain all transactions etc

I think you are overestimating the requirements is SA. You’ll logon, choose which Sections are relevant then the SA form will be prepopulated with your salary information from the P60 and you confirm it’s correct. 

noclaf

I'm sure I've probably asked this before but have the memory of a goldfish.....if I sal sac to the extent it saves me employee NI, would this potentially impact my state pension provision? For example if I currently need 8 years to obtain a full state pension and then do lumpy sal sac for two years will it result in taking longer to achieve full state pension?

Linton

noclaf said:

I'm sure I've probably asked this before but have the memory of a goldfish.....if I sal sac to the extent it saves me employee NI, would this potentially impact my state pension provision? For example if I currently need 8 years to obtain a full state pension and then do lumpy sal sac for two years will it result in taking longer to achieve full state pension?

SalSac has no effect on the state pension.   You get an NI year for paying the appropriate NI for your salary. The requirement to at least pay minium wage ensures you are earning enough to pay NI.

HCIMbtw

noclaf said:

HCIMbtw said:

noclaf said:

tebbins said:

Student loan repayments are on your gross salary, before pension contributions unlike income tax.
Using MSE income tax calculator, with a Plan 1 loan and upping your pension contributions to 26%, would leave you with £2.7k per month take home.

Edit: I did not know salary sacrifice was treated differently, every day's a school day.

Hi Tebbins,

So my pay setup is slightly complicated in that my base is actually circa £57,600 and I then receive an allowance on top that takes my standard gross pay(not including bonuses) to just under £63k. The allowance can be used to buy various benefits or taken as cash, I take the vast majority as cash and in fact I will be taking all as cash for next year.
The pension % via salary sacrifice is based on the £57.6k rather than the gross £63k including allowance. That's just how my employer have setup the pension. I also received a pay rise in September.
So as long as my taxable pay come March 2023 payslip is £50,000.00 or less would that mean I would still be eligible(or my wife actually) for full child benefit?
Additionally, would I need to complete a annual self assessment if we claim for child benefit? I've never completed one in my life so thought I'd ask

Am in a similar boat to yourself, albeit a bit earlier life with slightly less in pension

Yep would need to complete a self assessment tax return, doing the same myself for the first time this year 

Earn just over 60 before tax and ensure pension contributions take me down to just about £49,800 ish so we can claim child benefit... only curve ball is if I happen to earn a decent bonus.. which is very rare, but possible.. would kinda scupper my plans and would end up having to pay back some child benefit I assume

Anyone any advice on how to deal with that as a potential issue? should I set up an emergency SIPP 

Was also interested in the comment regarding NI credits for spouse, assume she wouldn't need to claim those while getting statutory maternity pay? 

The self assessment part puts me off, is there anyway to avoid it? Also would interest generated on current/savings accounts (albeit pretty rubbish on my cash accounts at present) count towards my annual income?

My understanding is the way to avoid it, would be to not take any child benefit. If I take child benefit and am reducing salary down to below £50k with pension payments, i'll have to self assess. 

But it shouldn't be to hard to do considering I have a pretty simple income. 

Just to note my employer doesn't allow us to set up SS, so I just lower salary through AVCs for pension, means i'm missing out on NI benefits which is a shame for retirement, but not much else I can do but keep asking them to allow SS

jamesd

noclaf said:

if I sal sac to the extent it saves me employee NI, would this potentially impact my state pension provision? For example if I currently need 8 years to obtain a full state pension and then do lumpy sal sac for two years will it result in taking longer to achieve full state pension?

Under the old state pension system you accrued state pension in two ways:

1. the basic state pension, 1/30th of this accrued per year of paying in or credits. No way to opt out.
2. the earnings-related state pension. You could opt out of this and most workplace defined benefit pension schemes did, as did quite a lot of people with personal pensions. How much you accrue depended on pay, with no increase above roughly the higher rate income tax threshold. When S2P replaced SERPS there was a bit of earnings-related accrual that you couldn't contract out of.

Starting in April 2016 the single tier system arrived and cut future benefits for those who will have long work histories. In this system you accrue 1/35th of the single tier state pension per year of contributions or credits and there is no earnings-related accrual. At the time of introduction a low earner was expected to lose around a quarter of their state pension accrual vs the old system. Gainers are those with spotty or otherwise limited work histories.

In April 2016 your entitlement under both systems was calculated and you were given the higher of the two. Accrual continued from then at the new system rate until you reached its cap.

Under the old system the sacrifice arrangement would have reduced pay and hence earnings-related NI but that is no longer the case and it now makes no difference at all.