Consequences of too much salary sacrifice into a pension??

[Olly]

I can't be bothered looking it up, I already did too much of that. I believe, but could be wrong, that the excess contribution tax is 55%. Anyone who wants to know for sure, I recommend Google.

Just had a goosey - can't find anything saying the tax is anything other than the income tax "credit" you saved - don't see anything about the two types of NI and the apprenticeship levy.

[Olly]

will always be lower than the tax if you go over - which is likely to be 40% if not 45%

I don't quite follow - please can you expand on that?

[WTFH]

The contribution needs to come out as salary sacrifice which means, by HMRC rules, you can only change the contribution rate if there is a "life event" so whilst I can get the income tax back if I "top up" at the end of the year I loose the employers, employees NI and apprenticeship levy so I'm trying to get it as close as poss first time and trying to work out the implications if I go over.

How long is your contract for?

If you’re concerned about being £100 under compared with paying a lot of extra tax, why not just play it safe.
Or, alternatively, speak to your accountant and run your actual figures by them.

[eek]

I don't quite follow - please can you expand on that?

Employer NI + Apprecenticeship levy 14.3%

Employee NI on higher amounts 2%

so the total you lose when making a payment from income you received is 16.3%

Go over and you are will be paying 40% tax on the over payment.

[Nava39]

My umbrella will only agree to pay a % of day rate via salary sacrifice into my private pension.
I want to max out £60k per year.
Because I don't know exactly how many days I will work it's impossible to give them an accurate % that when added up equals £60k
What would the consequences be of them paying in more than £60K
I asked the umbrella - Paystream - they don't know.
I've posted here rather than in the umbrella sub-section of the forum as I think it's more of an accounting/tax type qu.
Thanks

Paystream also take a fixed amount a day. So either you or the Paystream adviser is incorrect to say they only do a percentage.

This whole question is somewhat weird anyway. You pay in to a sipp until you eventually come close to the 60k limit. Then you manage submitting your timesheet by stopping them so that you are under the 60k contribution, and ask Paystream to stop the contributions. Then start submitting timesheets again. Any leftover allowance you can top up from personal contributions and claim tax on self assessment or use next year through salary sacrifice

[Olly]

Employer NI + Apprecenticeship levy 14.3%

Employee NI on higher amounts 2%

so the total you lose when making a payment from income you received is 16.3%

Go over and you are will be paying 40% tax on the over payment.

oh right - I thought the 40% tax was re-payment of the income tax that wasn't deducted - you're saying it's in addition to that?

[Olly]

This whole question is somewhat weird anyway. You pay in to a sipp until you eventually come close to the 60k limit. Then you manage submitting your timesheet by stopping them so that you are under the 60k contribution, and ask Paystream to stop the contributions. Then start submitting timesheets again. Any leftover allowance you can top up from personal contributions and claim tax on self assessment or use next year through salary sacrifice

PERFECT - never thought of that - dooooooh!!!!!!
I will ask them how they cater for time on timesheets that's a month late - it's probably fine
Thanks very much, thread closed for now I reckon.

[Lance]

PERFECT - never thought of that - dooooooh!!!!!!
I will ask them how they cater for time on timesheets that's a month late - it's probably fine
Thanks very much, thread closed for now I reckon.

don't ask them.......
Just submit them late (whatever late is). As long as you submit within the terms of the contract that's the end of it. And what "late" is, will be in the contract.

[hugebrain]

Paystream also take a fixed amount a day. So either you or the Paystream adviser is incorrect to say they only do a percentage.

This whole question is somewhat weird anyway. You pay in to a sipp until you eventually come close to the 60k limit. Then you manage submitting your timesheet by stopping them so that you are under the 60k contribution, and ask Paystream to stop the contributions. Then start submitting timesheets again. Any leftover allowance you can top up from personal contributions and claim tax on self assessment or use next year through salary sacrifice

But why stop paying into the SIPP when you hit the limit?

Google says that you then pay the income tax you would have had to pay anyway but you get to pocket the NI and apprentice money. ( GINAA ).

Personally, I’d pay the income tax and then invest in some dodgy EI scheme and claim the tax back, but overpaying the SIPP seems a valid approach too.

[Olly]

I ballsed this up. I will end up overpaying by £20k. Does anyone know if Hugebrain's concept above works - i.e. is the saving on NI and levy and pension growth being taxed at your tax rate on withdrawal "worth it"?
I planned - like many I expect - to take out of my pension up to the 40% threshold each year - i.e. an effective tax rate of 15% - couple that with 25% of pension being tax free and you get 11.25% effective rate.

The numbers must be pretty close.