Salary Sacrifice
Discussion
Hello,
http://blogs.telegraph.co.uk/finance/ianmcowie/100...
An article in today's Telegraph includes:
"Leasing cars for yourself, medical insurance, childcare vouchers and holidays are amongst the things you can buy direct from your gross salary to beat the Budget - and pay less income tax and National Insurance contributions."
I like to think I'm fairly clued up on these things (for a PAYE person) but some of these items were a shock. Are these particular packages that have to be offered by an employer (like Childcare vouchers which is a current offering) or would there be a way of arranging myself and sorting out by filling out a tax return?
Many thanks for any input.
http://blogs.telegraph.co.uk/finance/ianmcowie/100...
An article in today's Telegraph includes:
"Leasing cars for yourself, medical insurance, childcare vouchers and holidays are amongst the things you can buy direct from your gross salary to beat the Budget - and pay less income tax and National Insurance contributions."
I like to think I'm fairly clued up on these things (for a PAYE person) but some of these items were a shock. Are these particular packages that have to be offered by an employer (like Childcare vouchers which is a current offering) or would there be a way of arranging myself and sorting out by filling out a tax return?
Many thanks for any input.
If you can avail of some of these salary sacrifice options, then the Gross Salary that is used for calculating your Income Tax, your NI, benefits, tax credits and any clawback of benefits will be based on the REDUCED level of Gross Salary i.e. the Gross Salary AFTER the cost of salary sacrifice items have been removed.
Not every employee is offered salary sacrifice schemes - it depends on what the employer is doing. If there are no salary sacrifice schemes available, the employee can take some measures of their oown to reduce their Gross Salary levels. One would be to make contributions to a Personal Pension Scheme and another would be to donate money to charity either through the Gift Aid scheme or through a Deed of Covenant.
The main drawback of salary sacrifice schemes is that you could find yourself with a reduced Gross Salary amount quoted on your P60 at the end of each tax year which could work against you if you are using your salary as a negotitaing ploy in a job move or applying for credit.
I have generally not been a fan of salary sacrifice schemes up until now but for those who may lose out under the Child Benefit clawbacks, they are a genuine way of reducing the impact of these changes.
Not every employee is offered salary sacrifice schemes - it depends on what the employer is doing. If there are no salary sacrifice schemes available, the employee can take some measures of their oown to reduce their Gross Salary levels. One would be to make contributions to a Personal Pension Scheme and another would be to donate money to charity either through the Gift Aid scheme or through a Deed of Covenant.
The main drawback of salary sacrifice schemes is that you could find yourself with a reduced Gross Salary amount quoted on your P60 at the end of each tax year which could work against you if you are using your salary as a negotitaing ploy in a job move or applying for credit.
I have generally not been a fan of salary sacrifice schemes up until now but for those who may lose out under the Child Benefit clawbacks, they are a genuine way of reducing the impact of these changes.
Salary sacrifice arrangements have been around for at least 50 years. They are tax efficient.
The main drawback is that, because the amount sacrificed comes off gross salary, then gross salary is effectively reduced, so any salary related benefits, such as final salary pension, company sponsored life cover, redundancy pay, sick pay, are also correspondingly reduced.
R.
The main drawback is that, because the amount sacrificed comes off gross salary, then gross salary is effectively reduced, so any salary related benefits, such as final salary pension, company sponsored life cover, redundancy pay, sick pay, are also correspondingly reduced.
R.
No need to be confused. The internet is a wonderful thing -
http://www.childcarevouchers.co.uk/Pages/Default.a...
http://www.childcarevouchers.co.uk/Pages/Default.a...
The Leaper said:
Salary sacrifice arrangements have been around for at least 50 years. They are tax efficient.
The main drawback is that, because the amount sacrificed comes off gross salary, then gross salary is effectively reduced, so any salary related benefits, such as final salary pension, company sponsored life cover, redundancy pay, sick pay, are also correspondingly reduced.
R.
Is it not normal for a headline salary to be retained for the purpose of final salary etc? Certainly the arrangments I have been involved with all done this.The main drawback is that, because the amount sacrificed comes off gross salary, then gross salary is effectively reduced, so any salary related benefits, such as final salary pension, company sponsored life cover, redundancy pay, sick pay, are also correspondingly reduced.
R.
The Leaper said:
Ponk,
I don't think so, otherwise it's not salary sacrifice. HMRC may be interested too. Suggest you double check with your employer.
R,
Sorry, don't think I explained that very well! I don't think so, otherwise it's not salary sacrifice. HMRC may be interested too. Suggest you double check with your employer.
R,
Actual salary was reduced as per the requirements of salary sacrifice. However the employer maintained a link to what they called "headline salary" (i.e. salary pre reduction) for the purposes of the pension schemes, associated DIS benefits and also redundancy calculations etc.
Net effect being that employees did not lose out as a result of the arrangement. It's all legal and above board, the employer in question is UK based and employs around 30,000 staff.
I thought that was the norm, but my experience in this field is pretty limited!
Ponk said:
Sorry, don't think I explained that very well!
Actual salary was reduced as per the requirements of salary sacrifice. However the employer maintained a link to what they called "headline salary" (i.e. salary pre reduction) for the purposes of the pension schemes, associated DIS benefits and also redundancy calculations etc.
Net effect being that employees did not lose out as a result of the arrangement. It's all legal and above board, the employer in question is UK based and employs around 30,000 staff.
I thought that was the norm, but my experience in this field is pretty limited!
we have similar.Actual salary was reduced as per the requirements of salary sacrifice. However the employer maintained a link to what they called "headline salary" (i.e. salary pre reduction) for the purposes of the pension schemes, associated DIS benefits and also redundancy calculations etc.
Net effect being that employees did not lose out as a result of the arrangement. It's all legal and above board, the employer in question is UK based and employs around 30,000 staff.
I thought that was the norm, but my experience in this field is pretty limited!
a reference salary, then pension, sharesave, car allowance etc is all adjustments to that, but all payslips show the reference.
VTECMatt said:
When I did this many moons ago I got my then employer to sign a letter stating my real salary in case of some of the problems mentioned above..
Definately worthwhile - but I had such a letter and details and i can tell you that HSBC were not interested for the purposes of a mortgage. But then again they still didn't lend me the required amount despite weeks of waiting around and hours of interviews where they were only really interested in selling me accompanying life products. I got more that my desired amount with an alternate lender within 3 days - so shows how conservative they are.Gassing Station | Finance | Top of Page | What's New | My Stuff