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

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
Tax 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
Tax 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