Salary Sacrifice and tax year allocation

Troxy

I want to understand how salary sacrifice is allocated to a tax year if salary is paid before the end of the tax year but e.g. 31st March but is received by pension company in the following tax year e.g. 10th April.

There has been a question posted to hmrc (link below) which states it is allocated to when the salary is due but I cannot find anything corroborating this. Anyone know or have any experience?
https://community.hmrc.gov.uk/customerforums/payepe/c5a78d6e-f8b0-ed11-9ac4-00155d9c773d

QrizB

I'm not sure I understand your question.

The period in which you sacrifice your salary is the period in which you are (or aren't) paid.

If your March salary would have been £4000 gross but you've elected to sacrifice £1000 of it, you'll sacrifice it in March and receive £3000 gross instead.

Troxy

The question is around which tax year the sacrificed salary gets allocated to for annual allowance purposes.

If the salary is sacrificed on 31 March 2023 but gets received by the pension company on 10th April, does it count against 2022/23 annual allowance or 2023/24 annual allowance 

Grumpy_chap

Troxy said:

The question is around which tax year the sacrificed salary gets allocated to for annual allowance purposes.

If the salary is sacrificed on 31 March 2023 but gets received by the pension company on 10th April, does it count against 2022/23 annual allowance or 2023/24 annual allowance 

It is treated as 2023-24 annual allowance.
I had this question myself and it was asked in here a year ago as well - I will try to look up the more detailed reasoning when I have a bit more time.

zagfles

I'm a bit sceptical of the HMRC forum answer, but it's a good source to quote if there's any issues! Sal sac contributions are employer contributions, so as I understand it they would count when the employer actually pays it. The fact that they are somehow linked to you sacrificing some of your salary is between you and the employer. It's different for "net pay" as they are employee contributions.

Does it really matter anyway? It should only matter if you're trying to use carry forwards from 3 years ago, which exipres at the turn of the tax year. If it's just this year's AA you're trying to use up, then if your March sal sac isn't applied till 10 April it doesn't matter, you can just carry forwards.

Troxy

zagfles said:

I'm a bit sceptical of the HMRC forum answer, but it's a good source to quote if there's any issues! Sal sac contributions are employer contributions, so as I understand it they would count when the employer actually pays it. The fact that they are somehow linked to you sacrificing some of your salary is between you and the employer. It's different for "net pay" as they are employee contributions.

Does it really matter anyway? It should only matter if you're trying to use carry forwards from 3 years ago, which exipres at the turn of the tax year. If it's just this year's AA you're trying to use up, then if your March sal sac isn't applied till 10 April it doesn't matter, you can just carry forwards.

Unfortunately it does matter for me because of carry forwards etc., it looks like I have inadvertently gone over my annual allowance because the company I work for were quick to send pension payments this time round but slow last time so an extra contribution in the tax year 22/23 that I wasn’t expecting!

zagfles

Have you got a PIA (pension input amount) statement from the scheme? If that shows eg 13 payments in the 22/23 tax year because they paid March 22 late and March 23 early then put in a complaint to the scheme/your employer. There should be consistency around how turn of tax year payments are dealt with, it doesn't just affect sal sac but also normal employer funded contributions.