Salary Sacrifice and National Minimum Wage Time period

ManMadeWays

I understand you cannot Salary Sacrifice below NMW, but is that in a month or a year ?

I am now retiring on a package (thanks Employer !) end of September, I wanted to SS July to September pay inc PILON at 100% but payroll said no, below NMW. But my earnings April to June are over double NMW so I can SS the lot from June to September, and still, for the 6 month period be above NMW.

Can't find any definitive advice on the time period it would relate to.

Thanks In Advance

NoMore

Its per pay period, they can't pay you zero for a couple of months, just because overall annually you would earn more then NMW. Every pay period has to be at least NMW.

ManMadeWays

Thanks for swift response, actually I have some non pensionable pay elements (car plus some cash) that would leave me with about a £1k per month, I have asked it to be 85% anyway that keeps it above NMW per month. Voluntary Severance element is being paid after I leave and they cannot SS any of that so trying to max out before I'm off payroll. Cheers

Marcon

NoMore said:

Its per pay period, they can't pay you zero for a couple of months, just because overall annually you would earn more then NMW. Every pay period has to be at least NMW.

...and a pay period can't be longer than 31 days: https://www.gov.uk/national-minimum-wage/employers-and-the-minimum-wage

ManMadeWays

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

Dazed_and_C0nfused

ManMadeWays said:

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

What Self Assessment criteria means you need to file a tax return?

Being liable to higher rate tax isn't a reason.

Contributing to a RAS pension scheme isn't one either.

ManMadeWays

Dazed_and_C0nfused said:

ManMadeWays said:

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

What Self Assessment criteria means you need to file a tax return?

Being liable to higher rate tax isn't a reason.

Contributing to a RAS pension scheme isn't one either.

If I leave employment 30th September, then make a £30k payment to my SIPP in October I get BR relief claimed back by the SIPP, how do I get the HR relief back to me?. I'll have no more earnings in that tax year so I'll do a P50 form.

The SIPP will claim back £7,500 ? (£30,000/0.8*0.2) , HR releif is £20,000 (£30k/0.6*.4) How do I get the £12,500 ?

Marcon

ManMadeWays said:

Dazed_and_C0nfused said:

ManMadeWays said:

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

What Self Assessment criteria means you need to file a tax return?

Being liable to higher rate tax isn't a reason.

Contributing to a RAS pension scheme isn't one either.

If I leave employment 30th September, then make a £30k payment to my SIPP in October I get BR relief claimed back by the SIPP, how do I get the HR relief back to me?. I'll have no more earnings in that tax year so I'll do a P50 form.

The SIPP will claim back £7,500 ? (£30,000/0.8*0.2) , HR releif is £20,000 (£30k/0.6*.4) How do I get the £12,500 ?

'Once we have received your completed claim, we will confirm if you are owed a refund or contact you if we need more information.

It may take 14 days to get a reply, you should not contact us during that period to check on progress.

If you do not have a bank or building society account, tell us the name and address of someone who does, so we can make the payment to them.

We will send a payable order to you or your nominee.'

https://www.gov.uk/guidance/claim-back-income-tax-when-youve-stopped-working

Phoenix72

ManMadeWays said:

Dazed_and_C0nfused said:

ManMadeWays said:

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

What Self Assessment criteria means you need to file a tax return?

Being liable to higher rate tax isn't a reason.

Contributing to a RAS pension scheme isn't one either.

If I leave employment 30th September, then make a £30k payment to my SIPP in October I get BR relief claimed back by the SIPP, how do I get the HR relief back to me?. I'll have no more earnings in that tax year so I'll do a P50 form.

The SIPP will claim back £7,500 ? (£30,000/0.8*0.2) , HR releif is £20,000 (£30k/0.6*.4) How do I get the £12,500 ?

Not sure on your maths there, are you expecting £12,500 on top of the £7,500? If so you are going to be disappointed. Your basic rate band will be extended by the gross contribution of £37,500, this in affect gives you £37,500@20% = £7500. Assuming you have paid HR tax on £37,500

ManMadeWays

Phoenix72 said:

ManMadeWays said:

Dazed_and_C0nfused said:

ManMadeWays said:

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

What Self Assessment criteria means you need to file a tax return?

Being liable to higher rate tax isn't a reason.

Contributing to a RAS pension scheme isn't one either.

If I leave employment 30th September, then make a £30k payment to my SIPP in October I get BR relief claimed back by the SIPP, how do I get the HR relief back to me?. I'll have no more earnings in that tax year so I'll do a P50 form.

The SIPP will claim back £7,500 ? (£30,000/0.8*0.2) , HR releif is £20,000 (£30k/0.6*.4) How do I get the £12,500 ?

Not sure on your maths there, are you expecting £12,500 on top of the £7,500? If so you are going to be disappointed. Your basic rate band will be extended by the gross contribution of £37,500, this in affect gives you £37,500@20% = £7500. Assuming you have paid HR tax on £37,500

Sorry I'm not being clear, yes I have enough HR pay.

My gross pay (inc PILON) after S/S at 6 months will be Circa £58k. After leaving I will get around another £67k VS, £30k is tax free, £37k is taxable so my total taxable earnings will be Circa £95k, Leaving circa £45k (not £50k my bad math) taxed at 40%. That £45k nets to £27k @40%, so I want to put the £27k into my SIPP and get HR relief. The 20% gets added automatically into the SIPP. How is the HR element treated ?

I assume then I fill out a P50 after this and provide evidence of the £27k into SIPP and in retrospect I get a refund of the HR element.

Dazed_and_C0nfused

ManMadeWays said:

Phoenix72 said:

ManMadeWays said:

Dazed_and_C0nfused said:

ManMadeWays said:

OK so payroll and I disagree about the percentage but for the avoidance of arguement I have accepted the 70% they say, covers July/Aug/Sept.

Payroll say I can't salary sacrifice PILON (I assume due to Post-Employment Notice Pay rules)

Payroll say I can't salary sacrifice the >£30k VS as it is paid post employment/,membership of pension scheme.

So is all I can do pay a lump sum into my SIPP, get the basic rate added into SIPP also, then do a SA to get the HR relief back as cash as I will have no more earnings in 24/25 after I leave?

What Self Assessment criteria means you need to file a tax return?

Being liable to higher rate tax isn't a reason.

Contributing to a RAS pension scheme isn't one either.

If I leave employment 30th September, then make a £30k payment to my SIPP in October I get BR relief claimed back by the SIPP, how do I get the HR relief back to me?. I'll have no more earnings in that tax year so I'll do a P50 form.

The SIPP will claim back £7,500 ? (£30,000/0.8*0.2) , HR releif is £20,000 (£30k/0.6*.4) How do I get the £12,500 ?

Not sure on your maths there, are you expecting £12,500 on top of the £7,500? If so you are going to be disappointed. Your basic rate band will be extended by the gross contribution of £37,500, this in affect gives you £37,500@20% = £7500. Assuming you have paid HR tax on £37,500

Sorry I'm not being clear, yes I have enough HR pay.

My gross pay (inc PILON) after S/S at 6 months will be Circa £58k. After leaving I will get around another £67k VS, £30k is tax free, £37k is taxable so my total taxable earnings will be Circa £95k, Leaving circa £45k (not £50k my bad math) taxed at 40%. That £45k nets to £27k @40%, so I want to put the £27k into my SIPP and get HR relief. The 20% gets added automatically into the SIPP. How is the HR element treated ?

I assume then I fill out a P50 after this and provide evidence of the £27k into SIPP and in retrospect I get a refund of the HR element.

Not sure you understand how the tax relief works with RAS (relief at source) contributions.

Everything stems from the net payment you make.  

So if you pay £27k that would be a gross contribution of £33,750 once the pension company adds the basic rate relief.  They will only ever add 25%, which is 20% of the gross contribution.  It doesn't matter if you are liable to 0%, 20%, 40% or 45% they will only ever add the basic rate relief based on your net contribution.

Your basic rate band will then be increased by £33,750 (the gross contribution) so you can pay more 20% tax and less 40%.  With taxable earnings of £95k a gross contribution of £33,750 is likely to save you £6,750 on your overall tax liability.  Meaning the real cost of getting £33,750 into your pension was only £20,250.

You may wish to reconsider if £27k is the (net) amount you want to contribute.