Salary Sacrifice and National Minimum Wage Time period

Phoenix72

As D&C says, you are not understanding how it works. To fully elimate HR tax on £45k you need to make a SIPP contribution of £36,000. This is then grossed up to £45,000 and extends your basic rate band by £45k meaning you pay 20% tax on £45k instead of 40%, saving you £9,000. You have £45k in your pension scheme that only effectively cost you £27k (£9k tax relief added by HMRC and the tax reduction of £9k).

ManMadeWays

Phoenix72 said:

As D&C says, you are not understanding how it works. To fully elimate HR tax on £45k you need to make a SIPP contribution of £36,000. This is then grossed up to £45,000 and extends your basic rate band by £45k meaning you pay 20% tax on £45k instead of 40%, saving you £9,000. You have £45k in your pension scheme that only effectively cost you £27k (£9k tax relief added by HMRC and the tax reduction of £9k).

Thanks, I get it now.