Salary sacrifice to be taxed

And employer payments into DB schemes are also exempt. Why is the proposal not to apply national insurance to those as well, especially as the employer contributionsn are far, far higher?

Why do the low paid need tax breaks. It’s the high paid workers who are ensuring an ever increasing tax burden as a quick glance at comparable country’s tax systems will show.

Car salary sacrifice schemes are seemingly exempt from these proposals but would surely be an easier sell to the public (as there is less benefit to the government encouraging people to use cars compared to the benefit the government gets if people fund their own retirement). Why the disparity?

I was referring to income tax and not NI. Salary sacrifice does not put you in a better position regarding income tax than if you reclaimed via your annual tax return. That was the point I was making. NI is not something I give much thought to given that the amounts I pay are dwarfed by the amount of income tax. But I put a lot into my pension to try and make up for the fact that (1) I was entitled to an employer pension until I was 31 and (2) that I worked part time for 12 years. It’s never been about saving tax, it’s about making sure that I am not reliant on the state in old age.

Boohoo76. Do you agree that you are paying less NI by using salary sacrifice, as does your employer.

For pensions, yes. That is what I use it for. But I am aware that it is used for other things where it is not possible to have the same tax benefit unless you use salary sacrifice. That is what I was referring to. Again, you at being rude and aggressive for no reason. You are just making yourself look idiotic.

But it's really hard to give tax breaks that work for the low paid that the wealthy can't also take advantage of, isn't it?

Again, not criticising the wealthy for taking advantage of tax breaks, I'm criticising them for whining about losing those tax breaks 😆

The wealthy don’t pay IHT - well no where near what they could be paying.

Take 2 people. One person has £100m assets including a house worth £5m. He gives £93m to kids in middle age, keeps the house and keeps £2m to live off. When they die the IHT is approx £2m on the house and on any left over cash. the £93m is tax free as long as they outlive the gift by 7 years.

Another person has £300k savings and a little house which is now worth £1.2k. They need these assets in their retirement to live off, and hence will pay tax on anything above the nil rate band. No IHT is avoided.

Rumours are that RR will do away with the 7 year rule, or modify it to try to stop the first person here avoiding tax.

Stamp duty is a truly dire tax that affects everyone, rich and poor. See the latest IFS podcast about property taxes to see why this tax must be axed as soon as possible.

The tax position for everyone will be the same whether they use it it not.

Again, you clearly don't know what it is.

"up to £60k" is what everyone with a pension puts in 🙄

I agree that tax breaks on pensions are for the wealthy. £60k pa is a lot. £40k was a lot. I suspect the average that goes in is under half of that. A cap of £1.02m was a lot, removing it was laughable.

I also think that a £20k tax free ISA allowance is for the wealthy, and while I enjoy it, I can't get worked up about it being reduced because the vast majority of people don't have £20k all together, let alone each year!

Tories are talking about removing stamp duty - another wealthy person tax. Low earners can never afford to buy, so it has no impact on them. Removing inheritance tax - a tax break fur the wealthy, you can bequeath up to £1m tax free in the most usual circumstances. How many people even have that, even with a home included? It's 6%. 6% of estates pay IHT. So, removing or reducing that is a tax break for the wealthy.

But it's really hard to give tax breaks that work for the low paid that the wealthy can't also take advantage of, isn't it?

I am completely aware of what salary sacrifice is. I know it is used for other things. But in my case I use it for my pension and the tax position for me personally would be the same whether I use it or not. Why are you so rude?

I'm not criticising people for legally reducing their tax bill, I'm criticising their outrage when the Government seek to change the rules. If you can afford to sacrifice up to 60k of your salary then, in my opinion, you're doing OK, and paying a bit more in tax won't impoverish you in old age.

…in line with what parliament wants you to do. Hence why it’s not tax avoidance by HMRC’s definition. Same as businesses claiming deductible expenses, or people investing in a ISA.

What would be the point of parliament passing legislation to encourage people to behave in a certain way (ie save for their retirement) if we all then ignored it?

For the most part, it's actually only delaying tax. Because on most of the pension you pay tax as you draw it down.

Most people pay into a pension to save for old age, the vast majority of people don't think about the tax element at all (and even fewer the NI element, as we have seen here).

I accept that when I worked full time, my last salary was c£83k, and I put as much into the pension as I could and to keep me below the 40% band. I'll pay 20% tax on 75% of it under current rules. As I got older I earned more and saved more as I could afford it and avoiding that 40% band was a productive hobby. And as the ability to draw it out got nearer, it felt more like a tax free short term savings scheme.

But, as others have said, that's how it was set up and the more I saved, the less likely I am to need to rely on the state later.

But tax avoidance is legal and arises for two main reasons

1. the government are trying to encourage certain behaviours (like invest in pensions)
2. they fucked up when they wrote the legislation - and that is entirely in their power to change. I would put the cliff edges in this category - poorly written and thought through legislation

🤣 you can dress it up in whatever language you like, but you're still doing it to avoid paying tax! HTH.

I think means testing the state pension is unfair. I have worked for years and years, not too far off retiring and ever since I started the projections for how much you have to save for retirement have had state pension built into it. All of a sudden everyone’s pension pots would have to find £150k to compensate. How is that going to happen?

And yes they did move the pension age from 60-66 for women with only about 10 years notice so they could do this, but I would feel like I had been conned.

Ethically and morally, by using a piece of statutory law in line with the intentions of parliament, your conscience is clear because you’re doing what the government, voted in by the public, want you to do.

And, again, showing that you don't know what salary sacrifice is.

It's NOT just where your employer deducts pension from your pay.

It doesn’t matter if the taxpayer has a legally binding contract that NI contributions would lead to a pension. We don’t have any agreement with the government and they govern though trust. As trust is falling fast in politicians we will be in total anarchy if the government suddenly put in means testing or decided the NHS would no longer be free at the point of use etc etc. if it wasn’t in their manifesto then it’s going to be a problem.

the wheels of government turn slowly unfortunately but we need bold politicians who are willing to look beyond their short term popularity and do something for the long term. This is the time to do it as Labour can’t really get less popular - but I don’t think they’re capable. They tied their hands with their promises not to raise the big 3 or touch the triple lock

No I wouldn’t be required to pay the tax. Rather than it being adjusted when my pension payment is deducted from my salary, it would be claimed back via my annual return. I am paying a lot into my pension to try to make up for all the years I worked part time and for the years I worked in roles that didn’t offer pensions (before the rules changed and employers became obliged to offer pensions). Yes, some people use it to reduce their overall salary - and who can blame them when going £1 over the £100k threshold can result in parents losing thousands in childcare support. But lots of people are paying extra into their pensions because they are trying to be responsible and provide for thenselves upon retirement. Using salary sacrifice means that they don’t need to account for it via an annual return which is simpler for both the employee and HMRC.

"Using HMRC's definitions"

But ethically, and morally, you are doing it to avoid paying as much tax as you would otherwise be required to if you hadn't "sacrificed" (🙄) some of your salary. This is essentially a higher earners tax break, the less well off simply can't afford to sacrifice any of their salary in that way.

My initial comment was made when I thought the thread was about higher earners using it to take themselves out of the higher rate tax band, then I realised the proposal was related to NC contributions, so I didn't comment further. But, even so, the NC aspect is simply corporate tax avoidance, with businesses using it to avoid paying the tax they would be required to pay if their employees hadn't salary-sacrificed. 🤷‍♂️

If put nothing past RR. She is wrecking the economy and smothered growth and increased unemployment by increasing NIC on emoyers, she is so thick she didn't understand that would happen. She borrowed money to fund train drivers, gave Junior doctors a pay rise but they went back on strike immediately because they now know Labour will just agree a pay off each time. She created this black hole and she's digging it deeper all the time. Things won't improve until Labour are voted out because they won't stop spending. I wonder if all the people that voted for them still feel so smug they got in? Today I read Labour led Blackpool council paid £35k to have zebra crossings painted rainbow to support the Pride community. Such a waste of money when kids go hungry.

It's not hard to "receive permission" though, it's just showing HMRC that you've set it up properly and are following the rules wrt how salaries are shown.

But it doesn't work for min wage staff which then excludes huge swathes of companies like retail, hospitality, cleaning, care work...... And most public sector schemes can't use it at all.

And there's no point "advertising" it, it's up to employers if they do it, there is definitely more admin, which is why some don't. And risk around things like unpaid leave periods. And people do have to be able to opt not to use it, so you have to have the facility to run a non sal sac schemes alongside it. So, you can definitely see why smaller firms can't be bothered!

It doesn't save loads for the employee either, maybe £15pm. Obviously depending how much they contribute. The big win is for the employer, especially with NI now increased. And some employers gift it back to the employee in their scheme, which is nice (I worked for a couple that did this).

Obviously some of the most economically harmful taxes can be cut or scrapped if we save £80-90bn per year by means-testing the state pension. Mandatory pension contributions to private schemes can be increased while keeping this fiscally neutral. And meanwhile there will be a significant amount of money left over to invest in areas that have been starved or cash and will actually generate productivity increases: infrastructure, education etc. I don’t know how I can explain it any more clearly that I have already, I have done so multiple times on this thread already.