Relief at source and income tax

francohoops

Hi 

Is there anyway of reducing taxable pay if an employer uses the relief at source pension method for my workplace pension? I’m trying to save income tax by reducing taxable pay from £15k to under my personal allowance 

Thanks 

Dazed_and_C0nfused

francohoops said:

Hi 

Is there anyway of reducing taxable pay if an employer uses the relief at source pension method for my workplace pension? I’m trying to save income tax by reducing taxable pay from £15k to under my personal allowance 

Thanks 

Go part time?

Relief at source contributions won't help you reduce your taxable income but don't forget you do get pension tax relief added to your contributions and as a result can end up getting more pension tax relief than the income tax you have paid 😀

Sarahspangles

Have you asked your employer if they offer salary sacrifice? Otherwise, you will get tax relief added to your pension contribution but you can’t ‘save’ that tax in such a way that it is available to you, outside your pension.

hugheskevi

What exactly is it you are trying to achieve that could be achieved by salary sacrifice or net pay, but not relief at source?

Ignoring National Insurance which is the same under relief at source and net pay, if you had gross salary of £15,000 and put £2,430 into a pension under net pay, you would pay zero income tax, have net pay of £12,570 and £2,430 in a pension.

If you had gross salary of £15,000 and put £1,944 into a pension under relief at source it would be grossed up to £2,430, you would pay £486 of income tax, and so have net pay of £12,570 and £2,430 in a pension.

francohoops

Thanks - that now makes sense. 

My wife fills out a self assessment tax return each year as a portion of her taxable earnings is from a rental property. The majority of her income is from her employment, but the rent is now pushing her over the personal allowance (she works part time). As a result this year she is having to pay income tax on the rent, plus a payment in advance of future years income tax  (as it's over £1k). 

Her company does not offer salary sacrifice. 

I was just wondering whether there was a clever thing we could do to avoid having to make payments to HMRC in Jan/Jul. From working it through I don't think there is, but I may be wrong.

The other consideration is that I'm a 40% tax payer, so it may be more efficient for me to top up my pension to get the 40% relief (and not look to reduce her take home pay/net earnings any further)

Dazed_and_C0nfused

francohoops said:

Thanks - that now makes sense. 

My wife fills out a self assessment tax return each year as a portion of her taxable earnings is from a rental property. The majority of her income is from her employment, but the rent is now pushing her over the personal allowance (she works part time). As a result this year she is having to pay income tax on the rent, plus a payment in advance of future years income tax  (as it's over £1k). 

Her company does not offer salary sacrifice. 

I was just wondering whether there was a clever thing we could do to avoid having to make payments to HMRC in Jan/Jul. From working it through I don't think there is, but I may be wrong.

The other consideration is that I'm a 40% tax payer, so it may be more efficient for me to top up my pension to get the 40% relief (and not look to reduce her take home pay/net earnings any further)

You must have misunderstood that part.

HMRC never ask for payment for future tax years.  

She may need to make payments on account for the 2024-25 tax year (in January 2025 and July 2025) but we are already 9 months into the 2024-25 tax year so definitely not for a future year!

francohoops

Yes sorry I meant payment on account for 24/25

Marcon

francohoops said:

Thanks - that now makes sense. 

My wife fills out a self assessment tax return each year as a portion of her taxable earnings is from a rental property. The majority of her income is from her employment, but the rent is now pushing her over the personal allowance (she works part time). As a result this year she is having to pay income tax on the rent, plus a payment in advance of future years income tax  (as it's over £1k). 

Her company does not offer salary sacrifice. 

I was just wondering whether there was a clever thing we could do to avoid having to make payments to HMRC in Jan/Jul. From working it through I don't think there is, but I may be wrong.

The other consideration is that I'm a 40% tax payer, so it may be more efficient for me to top up my pension to get the 40% relief (and not look to reduce her take home pay/net earnings any further)

Given that the employer as well as the employee would get an NI saving (even more important with the increase in employer NI), maybe now is the time for her to have a helpful chat with them and remind them, gently(!), of this? It's hard to see why an employer wouldn't warm to the idea of saving money for what isn't a huge amount of effort. The cost of amending payroll isn't that great, especially if employees can only change the amount they sacrifice once a year, as opposed to as often as they wish.

Maybe she could just happen to stumble across an article such as https://www.theaccessgroup.com/en-gb/hr/software/employee-engagement/employee-benefits/salary-sacrifice-schemes/benefits-of-salary-sacrifice/