Going over tax free pension allowance

TTRacerback

Recently sold some executive shares and to avoid paying Employers Nat insurance at 15% can I put all the profits into my pension ( I’m still full time employed) even though it puts me over the £60,000 tax free allowance …. I know I have to pay 40% to HMRC I’m just trying to avoid paying the Emp Nat ins …. I’m over pension age so don’t pay it on my salary ?

Please can anyone advise?

DRS1

The only form of pension contribution which works for NICs is salary sacrifice. But I don't think you can apply salary sacrifice to the sale of the shares - especially not AFTER you have sold them.

If you salary sacrifice some of your future salary would the employer share any of the employer NICs saved on that sacrifice? If they would then do you have enough future salary this tax year to sacrifice an amount equal to the gain on the share sale (without hitting NMW)?

The £60k annual allowance may not be a problem if you have unused annual allowance to carry forward from the last three tax years. Remember that the annual allowance includes employer contributions as well as your employee contributions (or if you are in a DB Scheme you need to have the Pension Input Amount).

poseidon1

https://forums.moneysavingexpert.com/discussion/6674865/going-over-tax-free-pension-allowance

Sounds like you were a member of unapproved employer share option scheme.

On grant of the option you entered into agreement with the employer to assume the employer's 15% NI liability on the value of the shares, as set out in the guidance below -

https://www.gov.uk/guidance/transfer-employers-national-insurance-to-employees

if this is what occurred in your case, you may wish to explore whether your employer went on to apply income tax relief for the NI you agreed to pay on the grant of the shares , via the company payroll as set out in the briefing notes below-

https://library.croneri.co.uk/cch_uk/etc/10025

https://tuerner.com/global-mobility/uk-tax-and-payroll-compliance-for-share-options-and-rsus/

If they did so, you have already had your income tax relief in relation to that NI payment you assumed, no further mitigation related to that NI is due. However, I am surprised none of this was explained by your employer in the literature accompanying the grant of your shares.

https://kpmg.com/uk/en/insights/tax/tmd-budget-key-implications-for-employee-share-plans.html