Reply to: Agency Only Offers PAYE - No Umbrella

[Lance]

So if I want to put in 40k I only need to pay my SIPP provider 32k and they will get the other 8k from HMRC? That's much better than waiting for SATR, I have written to ask the SIPP company about this.

this thread has picked up some bad maths along the way.

Point 1 (not about the maths) - for these sort of sums speak to an IFA.......

Point 2 - If you are a 20% tax payer, and pay £32k personally into your pension, the sum in the pension will be £38.4k (not £40k).
20% of £40k is £8k. 20% of £32k is £6.4k

[breaktwister]

If you pay into a pension privately then you get an automatic base rate credit.

So pay in 80 and your contribution becomes 100.

So if I want to put in 40k I only need to pay my SIPP provider 32k and they will get the other 8k from HMRC? That's much better than waiting for SATR, I have written to ask the SIPP company about this.

[breaktwister]

Sorry to revive an old thread but I have just been offered a contract in a similar situation where the agency is saying only PAYE is possible and they cannot salary sacrifice any pension contributions. If I decide to accept and then pay a full £40k into a SIPP "from my own pocket" I will get a minimum of 20% of this back as a tax rebate after my self assessment? How can I calculate what portion of the 40k will be returned at 40% or maybe I have misunderstood something?

EDIT: found an example that makes sense here: https://www.gov.uk/tax-on-your-priva...ion-tax-relief

Hopefully I understand correctly in that I will be due a minimum of 8k back from HMRC if I pay 40K into a SIPP and did not get any relief at source.

[ASB]

Can you not pay into a salary privately and then at year end self assessment recover the tax?

If you pay into a pension privately then you get an automatic base rate credit.

So pay in 80 and your contribution becomes 100.

Any additional credit is knocked off your tax bill via SATR (ie you are a higher rate taxpayer).

Of course the amount tou can get relief is governed by the 40k limit (or 4k) etc. When breached these qill be clawed back through your SATR.

[Andy Hallett]

I think agencies having to run their own payroll will be something that becomes more prevalent. Many of the brolly firms now offer PEO services to facilitate this. End customers want to secure and simplify their supply chain and you only have to look at the direction of travel in The States where clients often don't allow intermediaries between the agency and the worker, forcing agencies to pay them W2.

Tends to be driven by the huge risk averse corporates.

[eek]

That is exactly my question. If the employer offers salary sacrifice but without any contribution like employer ni payment does it make a difference to the employee whether they do salary sacrifice or year end private pension contribution

does the employee also save ni on salary sacrifice and is it meaningful amount or 1-2%? Bear in mind even after pension will still be higher tax payer

Yes because the employee NI side will be paid into your pension even if the agency / employer doesn't contribute the hidden employer side of things.

Let's say it's £100,000, £10k NI, £35k income tax, £55k paid to you.

with salary sacrifice the total will still need to add up to £100k so it becomes £40k pension, £8k NI, £22k income tax, £30k paid to you.

[NowPermOutsideUK]

That is exactly my question. If the employer offers salary sacrifice but without any contribution like employer ni payment does it make a difference to the employee whether they do salary sacrifice or year end private pension contribution

does the employee also save ni on salary sacrifice and is it meaningful amount or 1-2%? Bear in mind even after pension will still be higher tax payer

[eek]

Not true. You can elect the amount of the additional pension contribution you make as salary sacrifice as well as elect to give up your bonus to pension. That saves them the employer ni

the alternative is to pay into a sipp and then reduce your tax via self assessment

Doesn't mean they will contribute the employer NI savings that they make. That will just go into the gross profit pot.

[NowPermOutsideUK]

Not true. You can elect the amount of the additional pension contribution you make as salary sacrifice as well as elect to give up your bonus to pension. That saves them the employer ni

the alternative is to pay into a sipp and then reduce your tax via self assessment

[northernladuk]

Ah eek! Thank you. Yes the ni cannot be recovered which is a fair point

just a final twist to this question. If as a Uk perm employee you get given the chance to salary sacrifice or pay at the end of the year does it actually make a difference to you as an employee?!

i would prefer to pay at end of year and have accountant deal with it on self assessment but is there a ni twist which I am not seeing for the employee?! The employer won’t give back their ni saving obviously I don’t think. It’s a large corporate and I don’t think they will do that

You don't get the option as an employee do you? They have to offer a pension by law so you just get signed up on a plan and make monthly contributions directly out of your wage. There aren't usually any other options are there?

[NowPermOutsideUK]

Ah eek! Thank you. Yes the ni cannot be recovered which is a fair point

just a final twist to this question. If as a Uk perm employee you get given the chance to salary sacrifice or pay at the end of the year does it actually make a difference to you as an employee?!

i would prefer to pay at end of year and have accountant deal with it on self assessment but is there a ni twist which I am not seeing for the employee?! The employer won’t give back their ni saving obviously I don’t think. It’s a large corporate and I don’t think they will do that

[eek]

You can pay into a private pension from net income and recover the income tax paid from your self-assessment. It's not as convenient as a salary sacrifice scheme though.

You also cannot reclaim any NI paid on the money just income tax.

It's why salary sacrifice is so important as it's the only reason why an umbrella is a better bet than agency payroll.

And that was before the 2.5% NI increase that kicks off in April.

[tjccjt01]

You can pay into a private pension from net income and recover the income tax paid from your self-assessment. It's not as convenient as a salary sacrifice scheme though.

[northernladuk]

Can you not pay into a salary privately and then at year end self assessment recover the tax?

You mean you take gross and deal with the tax yourself later? No. The risk of you paying your tax stays with the agency I believe so they won't allow that.

[NowPermOutsideUK]

Can you not pay into a salary privately and then at year end self assessment recover the tax?