Salary Sacrifice

Paul_Wicker

I am employed full time and a basic rate tax payer.

I am contributing into a company money purchase retirement fund through salary sacrifice giving me a take home hourly rate 2p above the national living wage.

Am I also able to contribute to a SIPP and receive basic rate tax relief on my contributions?

af1963

Yes. Once you've been paid, you can ignore minimum wage limitations.  If you had other resources that you could live on, you could pay your full salary into the SIPP ( actually pay in 80% and have it topped up to 100%).  As your work pension contributions are all salary sacrifice, they are treated as employer contributions and don't count towards the earnings limit.  You can get tax relief even on the part of your salary that's covered by your tax allowance, even though you paid no tax on that portion.

(The work contributions *do* count toward the annual allowance limit of £60K, if you're sacrificing enough for this to be a consideration.)

Paul_Wicker

af1963 said:

Yes. Once you've been paid, you can ignore minimum wage limitations.  If you had other resources that you could live on, you could pay your full salary into the SIPP ( actually pay in 80% and have it topped up to 100%).  As your work pension contributions are all salary sacrifice, they are treated as employer contributions and don't count towards the earnings limit.  You can get tax relief even on the part of your salary that's covered by your tax allowance, even though you paid no tax on that portion.

(The work contributions *do* count toward the annual allowance limit of £60K, if you're sacrificing enough for this to be a consideration.)

Thanks for that.

Are there other forms of investment I could consider other than a SIPP which also enjoys tax relief?

I am nowhere near the 60k figure.

Grumpy_chap

Paul_Wicker said:

Are there other forms of investment I could consider other than a SIPP which also enjoys tax relief?

Your investment decisions should be based on meeting your life objectives first, not primarily enjoying tax relief.

El_Torro

A Stocks & Shares ISA is a popular choice for investing. You don't get tax relief but you don't pay tax on gains either. If you were investing in a General Investment Account you would be liable for Capital Gains Tax on gains. Also remember that money withdrawn from a pension is taxable, this isn't true for ISAs. 

Pensions and ISAs are the main forms of tax efficient investing for most of us. There are other vehicles but they tend to be for people with more money than most of us.

Paul_Wicker

El_Torro said:

A Stocks & Shares ISA is a popular choice for investing. You don't get tax relief but you don't pay tax on gains either. If you were investing in a General Investment Account you would be liable for Capital Gains Tax on gains. Also remember that money withdrawn from a pension is taxable, this isn't true for ISAs. 

Pensions and ISAs are the main forms of tax efficient investing for most of us. There are other vehicles but they tend to be for people with more money than most of us.

Thanks for that.

I have already invested £20000 into an ISA for this year.

kimwp

You can salary sacrifice down to minimum wage, which is below the living wage btw. That saves on ni, which a sipp wouldn't.

QrizB

kimwp said:

You can salary sacrifice down to minimum wage, which is below the living wage btw. That saves on ni, which a sipp wouldn't.

OP has already done that, per their first post on this thread.

Paul_Wicker

My mistake. I have salary sacrificed down to the National Minimum wage and not the National Living wage.

Marcon

Think there might be a bit of confusion! See https://www.gov.uk/national-minimum-wage/who-gets-the-minimum-wage

kimwp

QrizB said:

kimwp said:

You can salary sacrifice down to minimum wage, which is below the living wage btw. That saves on ni, which a sipp wouldn't.

OP has already done that, per their first post on this thread.

Their first post said living wage, not min wage, but they've now said they have sacrificed to min wage, so all good