Salary Sacrifice & NI Contributions

thundyuk

Hi all,

This might sound a silly question but I'm finding it hard to look up an answer.

If a person (me) decides to up their salary sacrifice pension to reduce the amount of income tax and NI that is taken out, and at the same time of course bump the pension pot up, is there a risk that you can put so much in that you no longer contribute any NI at all (or not enough) and so lose your qualifying year? 

Or is the amount such a high % that you'd have to basically throw your entire wage into the pot and therefore it's not really possible?

Thanks

MallyGirl

you cannot salary sacrifice yourself below national minimum wage so I don't think it is an issue

norsefox

You can't salary below the minimum wage, and the minimum wage (annualised) is some amount higher than the qualifying NI threshold.

The bigger concern would be ensuring that one (the individual) is earning enough to pay enough NI.  In practice, the maximum SS reduction and the minimum NI contribution can't and won't meet.

Aretnap

National Minimum Wage for a full time job is ~17K per year, depending on how old you are and exactly how you define full time. As above, this is well above the NI threshold, so it won't be an issue for anyone working full time.

It could still be an issue if you only work part time. In which case you also have to keep in mind that salary sacrifice doesn't save you any money once you go below the personal allowance (currently £12750) and in fact can cost you money.

Below the personal allowance you don't save any income tax by salary sacrificing (as you don't pay any anyway) but you do miss out on the tax relief which you get on personal contributions, whether or not you have actually paid any tax on the money.  This is also something to be aware of of you only work seasonally, which would also make it possible to salary sacrifice yourself below the personal allowance.

thundyuk

Thanks all. I'm talking about £35k per year so could SS a good chunk without issue assuming it's affordable (not that it is!). Interesting thought though and thank you for all your replies.