Moving Jobs - no longer SalSac

thelchap

Hi All,

I’ve just been offered, and have accepted a new job. It brings with it a significant salary increase (from £80k to £120) which is great, but the new employer doesn’t offer salary sacrifice, just a bog standard Stakeholder Pension where they contribute the legal minimum (3% + my 5%)

In my current role, I salary sacrifice 35% of my salary into my pension, with the employer matching 5% - and because it’s salary sacrifice, I don’t have to worry about claiming tax relief etc.

With my new role, I want to make sure that I’m contributing up to the £40k per year limit because I don’t need all this money right now and want to benefit from the tax relief, but I’m assuming that I will have to do this through a separate SIPP rather than through the stakeholder pension.

A couple of questions that will help me understand how to proceed:

- What is the process for claiming back Higher Rate Tax Relief if contributing to a SIPP?

- I’ve read that once you earn over £100k pa, you are required to submit a self-assessment tax return. I’ve never had to do this before; what figures/contributions etc should I now start tracking more closely to aid this process?

Thanks all,

A Chap

Dazed_and_C0nfused

As you are earning over £100k it was I'll be via your annual Self Assessment return.

You can provisionally claim some relief via your tax code but it is your return that finalises things.

You can look at the paper return on gov.uk to see what's needed but essentially it will be details of all your taxable income, pay, interest dividends etc.  Any job related benefits or expenses.  And any relief you are eligible to claim such as on relief at source pension contributions or Gift Aid payments.

There may also be High Income Child Benefit Charge to consider.

One thing you should be aware of is that HMRC often provisionally allow pension tax relief based on your Self Assessment return but that is not allowing tax relief for the year the return relates to.

For example you file a return for 2022:23 during the 2023:24 tax year.  Shortly after your 2023:24 tax code is amended to allow higher rate relief on pension contributions.  That is not the relief for 2022:23.  It's provisional relief for 2023:24 based on the assumption that you will continue to make similar contributions in 2023:24.

Albermarle

 but I’m assuming that I will have to do this through a separate SIPP rather than through the stakeholder pension.

You have four choices 

Increase your % workplace contributions significantly ( presume this will be possible )

Make separate lump sum contributions to the workplace stakeholder pension ( usually this is OK to do ) 

Open a new pension and add to that 

Any combination of the above .

A stakeholder pension has the merit of being relatively straightforward to operate , with limited investment choices ( not necessarily a bad thing ) with a reasonable cost .

A new pension could be more suitable and cheaper , or more expensive . It depends to some extent what investments you pick .

thelchap

Thanks for your input.

I hadn't considered that, even with a basic Stakeholder Pension, they might allow me to increase my contributions - that would certainly be easiest, but will wait and see what the situation is when I start. In terms of investment choices, i'm far from an expert, so try to stick to global index trackers as much as possible, so hopefully there is something equivalent.

With the self-assessment, is this something I need to register for ahead of time, or will I be "requested" to fill one in based on my salary? With regards to the higher rate tax relief - again, is this something that I will essentially "get back" at the end of the financial year once I've filled in the self-assessment? Or is this something i can request separately throughout the year?

Thanks again,

Chap

Albermarle

I hadn't considered that, even with a basic Stakeholder Pension, they might allow me to increase my contributions 

The stakeholder provider will always be happy if there is more money coming through the door, just like any other business. Your employer only needs to make an adjustment to the contribution % , although some will only allow you to change it once or twice a year.

Marcon

Albermarle said:

I hadn't considered that, even with a basic Stakeholder Pension, they might allow me to increase my contributions 

The stakeholder provider will always be happy if there is more money coming through the door, just like any other business. Your employer only needs to make an adjustment to the contribution % , although some will only allow you to change it once or twice a year.

...or you can pay direct the provider will claim basic rate tax relief on your behalf.

Might be the moment to have a chat with your new employer about how much they would save in NI if they used salary sacrifice. Try this link https://library.aviva.com/tridion/documents/view/epen15a.pdf to see if that lures them!