Content
U-Turns Galore
Premises, Promises
Filing Bonus
RIP: 0% Rate
His and Hers
Party Spirit
State Of The Union
VAT's The Point?
Going Dutch
Away Win For Revenue
WIP-Round
The Best Land Plans
Tax Free Gizmos
Where Theres A Will
Do You Work Here?
Out Of The Shadows
Sacrifice Works
Home Sweet Office
Sauce For The Goose
Blissful Ignorance
PC Or Not PC?
Lost On Penalties
Worth The Paper
Carry The Can
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If you contribute to your pension scheme, there is a simple way of saving National Insurance contributions. It's to agree a "salary sacrifice" with the employer - instead of salary coming to you to put into your pension scheme, an equivalent amount goes straight from the employer to the fund. The difference is that your salary is charged to NIC and you don't get that back (although you do knock pension contributions off for tax) - a direct contribution by the employer isn't charged to NIC. Suppose your salary is £30,000 and you put £1,200 a year into your personal pension fund. The Revenue put 22/78 of that into your fund as well, making £1,538. Your PAYE and NIC are worked out on £30,000. If you agree with your employer that your pay should be £28,462 instead, and £1,538 should go direct to the pension fund, you will save £169 in NIC and your employer will save £197. There is a catch. A number of other things may be based on your salary figure, such as overtime rates, annual bonuses, salary-related benefits - and, if it's an employer's final salary pension scheme, your pension. So cutting the salary may cut all these things as well. But the Revenue recognise that it is possible to set up the arrangements so that the salary is reduced for PAYE and NIC, but the old figure is still used as a basis for all these other things. That seems too good to be true, but it's there in black and white in the Revenue's own instructions to inspectors. If you want to discuss the most efficient way to contribute to pension schemes, we will be happy to help. |
© Bayar Hughes & Co., 2010.