HMRC warning on pensions contributions as your | U.Ok.Finance Information
HMRC has clarified the foundations round pension contributions after a query from a taxpayer.The individual requested the tax authority: “If salary sacrifice would take me below NMW [National Minimum Wage] can the employer cap my sacrifice to NMW and if so do they still have to comply with pension minimum contribution of 8% in total?”Beneath auto enrolment guidelines, employers should enrol their workers into a office pension scheme, and the equal of at the very least 8% of the worker’s wage has to enter the pot.Responding to the taxpayer, HMRC mentioned: “A salary sacrifice arrangement must not reduce an employee’s cash earnings below the National Minimum Wage (NMW) rates.”Employers should put procedures in place to cap wage sacrifice deduction and guarantee NMW charges are maintained. A lot will depend on the sort of scheme preparations in place and you’ll need to verify this together with your employer.”HMRC also directed the person to an advice page with more information about salary sacrifice.If an employee opts in to a salary sacrifice arrangement, their contract has to be changed to reflect this.The guidance, aimed at employers, explains: “The influence on tax and Nationwide Insurance contributions payable for any worker will depend upon the pay and non-cash advantages that make up the wage sacrifice association.”You need to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits you provide. For the cash component, that means operating the PAYE system correctly through your payroll.”The tax advantages of wage sacrifice will increase from April, as employers Nationwide Insurance is growing from 13.8% to fifteen%.Monetary advice firm Hymans Robertson is encouraging employers to have a look at wage sacrifice as an option.Hannah English, fead of DC Company Consulting with the firm, mentioned: “The savings employers could benefit from, by introducing a salary sacrifice system for employee pension contributions, should not be understated.”For each £100,000 of wage sacrificed, a £15,000 saving unlocks doorways for companies at a time the place prices are being squeezed.”Employers who already have a salary sacrifice system in place should maximise employee pension contributions in this way. They could also encourage further savings into a pension through other means – for example, through bonus sacrifice.”This could help mitigate the modifications that come into place in early April whereas enhancing the retirement prospects of current workers.”
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