Salary Sacrifice Query and Help Needed

cameroon95

Hi All,

Need some help help, I am finding out just now that I can maybe increase my % for Salary sacairifice . I rather foolishly thought I could only pay 5% of my salary as that was what the scheme started at to opt in, ive been paying most of it through normal contributions.


Current salary of £54,000.

Paying 5% Salary Sacrifice :£225 per month

Paying 20% AVC Contributions : £900 per month

Employer pays 5% on Top

Total Current Fud : £92,000

Age : 37

I guess my question is, and apologies if this is daft, how much should I up my salary sacrifice contributions to to get to the lower tax band? Im a bit of a novice to this so any advice appreciated 


Thanks 

Woby_Tide

If you contribute £1,125 a month already your effective salary is £40,500 so you are already well into the lower tax band as higher rate starts at £50,271?

Dazed_and_C0nfused

Unless you are Scottish resident for tax purposes you will already be in the lower tax band.

Your pay for tax purposes is at most £51,300.

What method is being used to pay the AVC's?  Net pay (like salary sacrifice but no NI saving) or relief at source (taken from your net take home pay and then tax relief is added by the pension company)?

cameroon95

I am a scottish resident , I stay just outside Aberdeen.

Regarding my AVC I admit im not really sure, it doesn't come straight off my pay before tax like my salary sacrifice does ?

Can you see any benefit in increasing salary sacrifice and reducing AVC?

Dazed_and_C0nfused

The AVC sounds like relief at source so your £900 will have £225 in pension tax relief added making a fund of £1,125.  And if will increase your basic rate band by £13,500 (for a full tax year) so you will get a personal income tax saving as well.
NB.  You need to sort this out with HMRC yourself, it's nothing to do with the pension provider.

With salary sacrifice you don't get any pension tax relief so £900 sacrificed gives you a pension fund of £900.  But you avoid paying tax or NI on the £900 so it's more tax/NI efficient and less hassle.

Salary sacrifice actually means you aren't contributing to the pension, hence no pension tax relief, you are agreeing to a lower salary in return for larger employer contributions.  So you don't need to tell HMRC as there is nothing you can claim back, you get the maximum tax/NI saving each payday by not having the income to be taxed in the first place.

Dazed_and_C0nfused

If the existing AVC's are relief at source (you should be able to check your pension account to see if tax relief is being added) then are you claiming the additional relief due from HMRC?

cameroon95

I havnt spoken to HMRC about any of this, I guess I just naviely thought it was taken care of by my payslip?

Should I get in contact to see if I can claim back?

Dazed_and_C0nfused

cameroon95 said:

I havnt spoken to HMRC about any of this, I guess I just naviely thought it was taken care of by my payslip?

Should I get in contact to see if I can claim back?

Not until you actually know what's happening.

As a start you need to check your P60's to see if you paid tax above the basic rate (highly likely) and also look at what "relief at source" contributions were paid in each tax year from 2018:19 to 2021:22.

If you contact HMRC without understanding that you are going to get nowhere fast!

You don't mention salary sacrifice contributions to HMRC as you are not entitled to any tax relief on those (as you don't pay them).

cameroon95

Ok , understood.

I have definitely paid tax at the higher rate . 

How would I know about relief at source? Where would I find this information on my payslip? On my pension fund online it only states my contributions and my employers contributions, I dont have much information apart from that.

Thanks for your help

Dazed_and_C0nfused

With relief at source if you personally contributed £900 then 25% gets added giving you a £1,125 gross contribution (20% of £1125 = £225) 

You should see this in your pension account.  Or just ask the pension company.

If it's not relief at source you have almost certainly already received the maximum tax saving. 

Albermarle

cameroon95 said:

Ok , understood.

I have definitely paid tax at the higher rate . 

How would I know about relief at source? Where would I find this information on my payslip? On my pension fund online it only states my contributions and my employers contributions, I dont have much information apart from that.

Thanks for your help

Usually it is clear for the online account when the provider has added the basic rate tax relief. Although as D&C says you probably are best to contact them to confirm what is going on.
If they are not adding it, then either the payments are not relief at source/from after tax pay. OR they are relief at source and the provider has not been adding the tax relief for some reason.
Are the SS payments and the AVC payments to the same pension ? Maybe this has caused some admin issue if they are?