Bonus Sacrifice
Discussion
My employer has offered a bonus sacrifice scheme, so instead of taking the cash (less tax and NI) I can pay all or some of it into my pension, I already do salary sacrifice so I think I understand the maths but hopefully someone could confirm this simple calculation please?
e.g. Higher rate taxpayer £10K bonus, less tax (£3920) and NI (£200) is £5,880.
for the bonus sacrifice the employer will add 13.8% (their cost) so the total net sum into the pension would be £11,380, which grossed up is £18,967.
Is this correct or have I missed something?
Thanks in advance.
e.g. Higher rate taxpayer £10K bonus, less tax (£3920) and NI (£200) is £5,880.
for the bonus sacrifice the employer will add 13.8% (their cost) so the total net sum into the pension would be £11,380, which grossed up is £18,967.
Is this correct or have I missed something?
Thanks in advance.
x5x3 said:
My employer has offered a bonus sacrifice scheme, so instead of taking the cash (less tax and NI) I can pay all or some of it into my pension, I already do salary sacrifice so I think I understand the maths but hopefully someone could confirm this simple calculation please?
e.g. Higher rate taxpayer £10K bonus, less tax (£3920) and NI (£200) is £5,880.
for the bonus sacrifice the employer will add 13.8% (their cost) so the total net sum into the pension would be £11,380, which grossed up is £18,967.
Is this correct or have I missed something?
Thanks in advance.
No need to gross up, £10,000 is gross. e.g. Higher rate taxpayer £10K bonus, less tax (£3920) and NI (£200) is £5,880.
for the bonus sacrifice the employer will add 13.8% (their cost) so the total net sum into the pension would be £11,380, which grossed up is £18,967.
Is this correct or have I missed something?
Thanks in advance.
Total going into your pension will be £11,380.
I tend to sacrifice bonus into pension, if you weren't expecting it then might as well forget about it and save some tax.
As mx stu says £11,380 goes into your pension. Net cost to you is £5,880 (i.e. £10,000 - £3,920 - £200).
Most 40% tax payers (6 out of 7?) do drop down to basic rate when they retire so there is a genuine tax saving assuming that current rates are a good guide to future rates. Plus, the NI saving (especially given your employer is being quite generous in giving all of their NI saving) is a real incentive.
Out of interest, why £3,920 of tax? Why not a round £4,000? (Apologies if the answer is obvious - I'm coming out of a nasty viral infection so feeling a bit woozy.)
Most 40% tax payers (6 out of 7?) do drop down to basic rate when they retire so there is a genuine tax saving assuming that current rates are a good guide to future rates. Plus, the NI saving (especially given your employer is being quite generous in giving all of their NI saving) is a real incentive.
Out of interest, why £3,920 of tax? Why not a round £4,000? (Apologies if the answer is obvious - I'm coming out of a nasty viral infection so feeling a bit woozy.)
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