Salary Sacrifice could save 45.8% in Tax and NI – how does it work? 10


Most employees pay 20% tax, 12% Ees NI and their employer pays 13.8% NI, so thats a total tax of 45.8% on employment income.

 

There are a range of tax and NI free benefits, for example childcare vouchers, where £55 per week can be paid by the employer, so lets use that as an example, using the calculator

http://listentotaxman.com/index.php

An employee earning £30k a year gets

 Wage Summary  Yearly  Monthly  Week
Gross Pay £30,000.00 £2,500.00 £576.92
Tax free Allowances £7,475.00 £622.92 £143.75
Total taxable £22,525.00 £1,877.08 £433.17
xTax due £4,505.00 £375.42 £86.63
National Insurance £2,732.64 £227.72 £52.55
Total Deductions £7,237.64 £603.14 £139.19
Net Wage £22,762.36 £1,896.86 £437.74
Employers NI £3,164.06 £263.67 £60.85

 

 

 

 

 

 

 

Total Tax and NI = £10401.70

If they use Salary Sacrifice for £55 x52 = £2860, new salary would be £27140

 Wage Summary  Yearly  Monthly  Week
Gross Pay £27,140.00 £2,261.67 £521.92
Tax free Allowances £7,475.00 £622.92 £143.75
Total taxable £19,665.00 £1,638.75 £378.17
xTax due £3,933.00 £327.75 £75.63
National Insurance £2,389.44 £199.12 £45.95
Total Deductions £6,322.44 £526.87 £121.59
Net Wage £20,817.56 £1,734.80 £400.34
Employers NI £2,769.38 £230.78 £53.26

 

 

 

 

 

 

 

Total Tax and NI = £9091.82

A saving of £1309.98 (45.8% of £2860)

For saves on this scale should you be looking at Salary Sacrifice schemes for your employees,I have seen schemes where it can be applied to a wide variety of things from Pensions to Cars

steve@bicknells.net

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