Your workplace pension scheme should operate as tax-efficiently as possible. Salary exchange (also known as salary sacrifice) can help you and your employees by utilising tax allowances that provide relief on Income Tax and National Insurance Contributions (NIC).
Introduction
Salary exchange lowers the amount of Employer NIC your organisation must pay. Meanwhile, lower Employee NIC, alongside Income Tax relief, could result in more take-home pay for your workforce. Since the National Living Wage has increased significantly over recent years, such an arrangement could help you offset the costs.
There are two ways to introduce salary exchange: opt-in and opt-out. The former could prove problematic as it requires HR to liaise with all employees to vary their contracts. Opt-out salary exchange simplifies the approach by operating on a non-affirmation basis.
This is known as the Smart Pension Scheme (SPS). It is approved by HM Revenue and Customs and could be the ideal way to reduce your organisation’s tax burden.
Read our guide for more information.
How can we help you?
If you would like assistance with your employee benefits, or if you wish to arrange an initial no cost, no obligation, consultation, then please fill out the contact form below. Alternatively, you can call 01603 706 820 or email info@lffp.co.uk.
Important information
The contents of this article do not constitute financial advice. The impact of taxation (and any tax relief) depends on individual circumstances. This has been prepared based on our current understanding of UK Law, Taxation and HMRC practice, all of which could be subject to change in future.
While considerable care has been taken to ensure this information is accurate and up-to-date, no warranty is given as to its accuracy. This article constitutes a financial promotion.
