Can someone please explain what the 2K threshold and NI contributions change means

Andy_L

af1963 said:

Why not include person C in a £50k job, who also wants a good pension and also puts in £10k gross, but doesn't work for an employer who offers salary sacrifice, and who has always been paying the NI that person A is now being asked to (partly) pay ?

Or person D on minimum wage who doesn't get the option to salary sacrifice even if she wants to, and must also pay NI or her contributions.

AIUI person E who's in a £40k job who's employer pays a 25% employer contribution to a DC scheme (on a take it or leave it basis)  doesn't pay NI on the pension & neither does the employer.

its all a bit of a mess "taxing people on how something is done, not what is done. "

AlanP_2

BlackKnightMonty said:

MeteredOut said:

BlackKnightMonty said:

Albermarle said:

doodling said:

Hi,

zagfles said:

Companies have a long time to react to this. Wonder how many will start operating "reverse sal sac" schemes? Offer jobs paying eg £30k with £30k employer pension conts, with the option to trade pension conts for extra salary 

Im expecting HMRC (and maybe government through legislation) to be playing "whack a mole" with that and other, similar approaches for several years.

The exact definition of salary sacrifice previously hasn't really mattered since it didn't really affect how much tax was paid - it does now and the creative skills of those at the edge of the tax system will no doubt be put to full use.

I can see some employers, after consultation with staff, paying pay rises as increases in pension contributions for the next few years - that wouldn't be salary sacrifice either providing it wasn't done on an individual basis.

The fundamental problem is that the government has decided to tax based on how something is done, not on what is done - that approach will always create loopholes and unfairness.

The current system itself is also unfair,
Only about a third of private sector employees and 10% of public sector employees are actually in salary sacrifice schemes. Plus of course the self employed and minimum wage workers do not benefit.
So everybody else is paying their full NI , whilst those lucky enough to be in salsac schemes do not .
According to the budget data, 74% of basic rate taxpayers in salsac schemes will not be affected by the change.
So at a rough guess, about 12% of employees overall will be affected. Mainly those with the broadest shoulders I think.
On the other hand those with the broadest shoulders can still fill their boots with 40% tax relief on pension contributions, so could have been a lot worse.

Those with the broadest shoulders are tired from having to carry so many people.

I'd suggest it is those who are mainly looking out for themselves "are tired from having to carry so many people".

Those of us who appreciate that salary sacrifice is a very generous tax saving mechanism can accept paying a little more to support those that need it.

I paid over £50k in income tax and NIC last year, shoulders ache so much. I am deeply resentful in paying a penny more.

Change to a minimum wage job then and avoid feeling resentful.

artyboy

AlanP_2 said:

BlackKnightMonty said:

MeteredOut said:

BlackKnightMonty said:

Albermarle said:

doodling said:

Hi,

zagfles said:

Companies have a long time to react to this. Wonder how many will start operating "reverse sal sac" schemes? Offer jobs paying eg £30k with £30k employer pension conts, with the option to trade pension conts for extra salary 

Im expecting HMRC (and maybe government through legislation) to be playing "whack a mole" with that and other, similar approaches for several years.

The exact definition of salary sacrifice previously hasn't really mattered since it didn't really affect how much tax was paid - it does now and the creative skills of those at the edge of the tax system will no doubt be put to full use.

I can see some employers, after consultation with staff, paying pay rises as increases in pension contributions for the next few years - that wouldn't be salary sacrifice either providing it wasn't done on an individual basis.

The fundamental problem is that the government has decided to tax based on how something is done, not on what is done - that approach will always create loopholes and unfairness.

The current system itself is also unfair,
Only about a third of private sector employees and 10% of public sector employees are actually in salary sacrifice schemes. Plus of course the self employed and minimum wage workers do not benefit.
So everybody else is paying their full NI , whilst those lucky enough to be in salsac schemes do not .
According to the budget data, 74% of basic rate taxpayers in salsac schemes will not be affected by the change.
So at a rough guess, about 12% of employees overall will be affected. Mainly those with the broadest shoulders I think.
On the other hand those with the broadest shoulders can still fill their boots with 40% tax relief on pension contributions, so could have been a lot worse.

Those with the broadest shoulders are tired from having to carry so many people.

I'd suggest it is those who are mainly looking out for themselves "are tired from having to carry so many people".

Those of us who appreciate that salary sacrifice is a very generous tax saving mechanism can accept paying a little more to support those that need it.

I paid over £50k in income tax and NIC last year, shoulders ache so much. I am deeply resentful in paying a penny more.

Change to a minimum wage job then and avoid feeling resentful.

Or even better, stick to volunteering, and have a few more children. That'll show'em

Grumpy_chap

BlackKnightMonty said:

UK chancellor Rachel Reeves is to rush through laws to enact her Budget to reassure nervous markets that key tax increases will definitely be implemented even if they do not kick in for several years.

Legislation for a crucial £4.8bn tax rise on pension contributions made through salary sacrifice schemes is expected to be introduced before Christmas, even though it will not take effect until April 2029, officials said.

https://on.ft.com/4837XOi

Laws can be passed now for a change from 2028 or 2029.
Nothing to stop Government repealing those laws.
Particularly if the implementation date falls after the next GE