New job inside IR35 - how to reduce tax via salary sacrifice

Hi all.

As the job title says, I'm starting a new contract job mid January next year and want to stay below the 40% tax bracket by using salary sacrifice into my pension.

Day rate is £350 per day ergo weekly rate is £1750.
Assuming 252 working days x daily rate = £88,200 annually.
I will be claiming the £6 work from home allowance.

Obviously I need to pay both mine and my employer's national insurance and tax contributions. How much would I need to salary sacrifice each month or week to hit that lower tax bracket?

Happy to give more information if needed. Thanks in advance.




"The problem with Internet quotes is that you can't always depend on their accuracy" - Abraham Lincoln, 1864

Comments

  • Grumpy_chap
    Grumpy_chap Posts: 14,420
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    The most tax efficient route will be to SS everything apart from NMW to the pension.

    If you are basing things on annual gross at £88k and you wish to be below 40% tax bracket, that's £50k in round terms, you need to SS £38k, so 44% of gross.

    The actual percentage you need to SS will be slightly lower as there is the UC fee to consider plus a little bit of a win from the WFH allowance (assuming eligible) but you also need to consider that any other income (interest and such like) will increase your ANI and, hence the tax payable.

    I suspect the UC will not process the WFH claim so you will need to claim the appropriate tax back via your tax return. Please be aware the eligibility is no longer as broad as it was during COVID years.

    If you are speaking with the UC to choose where to go, ask them to run an illustration for you based upon the rate and working days that you have set out and with 40 - 45 - 50% SS to pension.  Not all UCs will allow SS and some will restrict the pension companies they are willing to work with.
    One thing to watch when asking for the illustration is the UC staff are not always that good at doing an illustration on an annual basis that takes into account the fact you will have some non-working days.

    On that point, your 252 working days seems to be ignoring non-working days other than BH.  252 working days (5 days week) is 50.4 working weeks which is the whole year 52 weeks less 8 days BH.  You probably need to consider 4 weeks annual leave plus another 2 days of "whatever" absence (sickness, training, duvet-days, urgent caring).  That means 46 weeks or 230 working days.
    Annual income is then £80.5k and you only need to SS £30.5k (38% of gross). 

    Hope that helps.
  • Indeed, very helpful thank you. Much appreciated.
    "The problem with Internet quotes is that you can't always depend on their accuracy" - Abraham Lincoln, 1864
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