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Posted Wed, 06 Jul 2022 20:08:32 GMT by Nate Cameron
I have a question about the timing of pension salary sacrifice (and matched employer pension contributions) vs. when these are actually contributed to my pension fund, and how this relates to my Annual Allowance (and threshold and adjusted income calculations). I started working at my current employer in the middle of the 2021-22 tax year. A payslip is issued and I am paid on the last working day of each month. I am signed up with my employer's salary sacrifice programme, where 5% of my salary is deducted and my employer matches this with a further 5% contribution to my pension. I see that the transaction dates for each of these 5% deductions + 5% matched employer contributions is approximately 2 weeks later. Now, to my question: what is the treatment of my March deduction (which is taken from my 2021-22 tax year pay), but the pension contributions are added to my pension account in mid-April (i.e., in the 2022-23 tax year)? Same question for the matched contribution from my employer (directly related to my March salary sacrifice amount). To be specific: 1. How does this impact the calculation for my threshold income? Guidance on the HMRC website says to "Add any reduction of employment income for pension provision through any relevant salary sacrifice arrangements". I interpret this to mean that the amount salary sacrificed SHOULD be added to my threshold income for the 2021-22 tax year. 2. How does this impact the calculation for my adjusted income? Guidance on the HMRC website says to "Add pension savings made to your pension schemes where tax relief was given" and "Add the amount of pension savings your employer made for you". I interpret this to mean that the amount salary sacrificed and the matched employer contributions SHOULD NOT be added to my threshold income for the 2021-22 tax year (as the pension savings were not added to my pension scheme until mid-April). Instead this amount will be added to my threshold income for the 2022-23 tax year. This contradicts my interpretation to question 1, and feels odd given it relates to salary earned and paid in the 2021-22 tax year. 3. Which tax year's annual allowance does the March salary sacrificed amount and matched employer contribution count towards? Guidance on the HMRC website says that "Your annual allowance is the most you can save in your pension pots in a tax year (6 April to 5 April) before you have to pay tax". I interpret this to mean that even though the March deduction was taken from my pay in the 2021-22 tax year, the contributions will count towards my annual allowance for the 2022-23 tax year. Again, this contradicts my interpretation to question 1 and feels odd given it relates to salary earned and paid in the 2021-22 tax year. Thank you.
Posted Thu, 07 Jul 2022 16:21:50 GMT by HMRC Admin 20
Hi Nate Cameron,

Please refer to guidance at:
PTM041000 - Contributions: essential principles
scroll down to deemed date of contribution to see what method applies to you

Thank you.
Posted Fri, 08 Jul 2022 01:50:47 GMT by Nate Cameron
Hi, Thanks for the link. It answers part of my questions. Specifically, for all 3 questions I now know that my March 2022 salary sacrifice contribution (paid in mid-April) counts towards my 2021-22 tax year. This is based on the wording: "the date of payment in the case of a contribution made under the net pay arrangements is the date of deduction from the employee’s pay". I am still left with the questions regarding the matched contribution made by employer, which is added 2 weeks after the salary sacrifice it relates to. The link provided only addresses deductions for employees pay but not the employer's matching. Thank you.
Posted Mon, 11 Jul 2022 11:21:23 GMT by HMRC Admin 17

Hi,
 
The date of payment for a contribution made under Relief at Source, for example to a group or other personal pension scheme,

is the same as a payment the member makes direct.

For example the date authorised to draw money by direct debit from the employer’s bank account or the date the employer’s cheque is received.

Thank you.
Posted Tue, 12 Jul 2022 15:31:19 GMT by Nate Cameron
Thank you. So to clarify, if 5% of my salary is deducted from my pay at the end of March, but then this amount (and the corresponding matched contributions from my employer) is paid into my pension pot in mid-April, then: 1. My contribution from salary sacrifice will count in the 2021-22 tax year (as this is when it was deducted from my pay), BUT 2. The matched contribution from my employer will count in the 2022-23 tax year (as this is when my employer paid their matching contribution). Is that correct that these will count towards different tax years?
Posted Thu, 14 Jul 2022 14:23:51 GMT by HMRC Admin 26
Hi,

It is common for an employer to act as the collector of employee contributions for a group personal pension scheme.
Group administration processing can cause some delay between the employer deducting the contribution from the employee’s pay and the date that the pension provider is authorised to take money by direct debit from the employer’s bank account or the money is paid by BACS direct credit. For example, a delay may occur because individual figures need adjustment for part-timers or leavers.

When there is a delay after the deduction from the employee’s pay, the date of receipt by the pension provider is taken as the date of payment of the contribution. This could have a bearing when a contribution is deducted from the employee’s pay close to the end of a pension input period.

Thank you.
Posted Thu, 14 Jul 2022 15:40:00 GMT by Nate Cameron
Hi, Now I'm confused as this contradicts a the link posted by your colleague earlier which says that the "employer effectively acts as collection agent for the transmission of employee contributions taken from their pay and passed on to the relevant pension scheme administrator. The date of payment in the case of a contribution made under the net pay arrangements is the date of deduction from the employee’s pay". The last post here says that "When there is a delay after the deduction from the employee’s pay, the date of receipt by the pension provider is taken as the date of payment of the contribution". Which is correct? Fundamentally my 2 questions are: 1. Which tax year does the employee's contribution fall into (contribution deducted from employee's March pay and received by the pension provider in mid-April)? 2. Which tax year does the employer's matched contribution fall into? Thank you.
Posted Fri, 15 Jul 2022 17:57:52 GMT by HMRC Admin 20
Hi Nate Cameron,

It depends on how your payment is deducted.
If your pension payment is under the net pay arrangment then the deemed date of payment for your employers contribution is the same as yours.
If it is under reliefat source, the deemed date for the employers payment is the date of the direct debt for the funds to be taken from the employers account or the date the cheque is received by the pension company.

Thank you.
Posted Sun, 17 Jul 2022 16:58:24 GMT by Nate Cameron
Great, thank you. Yes, this is a salary sacrifice (net pay) arrangement, so based on this I will take both my March 2022 contribution (via salary sacrifice from my March pay) and my matched employer's contribution to count towards the 2021-22 tax year, even though the contributions are only made to my pension scheme in April 2022.
Posted Tue, 09 Aug 2022 16:07:46 GMT by Nate Cameron
I have another question related to the timing of the tax relief claimed by my pension scheme. A previous employer deducted my contributions from my pay and added them to the pension scheme. The pension scheme then took up to 3 months to claim the 20% tax relief from the government. What tax year do these 'tax relief' contributions correspond to? For example, if an £80 contribution is received by my pension scheme March 2022 and then the £20 tax relief is added in May 2022 is the £20 considered towards my 2021-22 annual allowance (as the relief is linked to a contribution made in 2021-22 tax year) or does the £20 count towards my 2022-23 annual allowance (as the relief is only claimed and received in the 2022-23 tax year)?
Posted Wed, 10 Aug 2022 08:05:29 GMT by HMRC Admin 17

Hi,
 
The relevant tax year would be the tax year in which you made the payments to the pension scheme .


Thank you .
 
Posted Fri, 16 Sep 2022 12:19:02 GMT by DonnaT
Hello, I've just had a call with my pension provider Aviva regarding a similar enquiry. The pension contributions paid into the scheme on my behalf by my employer (incl. their contributions) use the salary sacrifice method. Aviva provide summary of the contributions by tax years which take the date when the payment was made eg 19 April 2022 for a salary deduction on 27 March 2022. They have confirmed on the phone that the date which counts for tax purposes (incl. for working out the annual allowance and any unused allowances from previous years) is the date that the payment is made into the pension scheme. That contradicts the advice provided above, so can I please confirm that it is up to date? Also, I was with a different pension scheme up to April 2020 which used relief at source and the payments were made into it on the month after their deduction from my salary. My understanding is that the salary deductions in March 2020 (relief at source) and April 2020 (salary sacrifice) both count towards the 2020/21 tax year (although paid into different schemes). Is this correct?
Posted Tue, 20 Sep 2022 14:22:54 GMT by HMRC Admin 17

Hi,
 
The date depends on how the pension is deducted.

Please refer to:

Pensions Tax Manual    for more information  .

Thank you.

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