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  • RE: Annual allowance: Timing of pension salary sacrifice and employer contributions

    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)?
  • RE: Annual allowance: Timing of pension salary sacrifice and employer contributions

    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.
  • RE: Annual allowance: Timing of pension salary sacrifice and employer contributions

    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.
  • RE: Annual allowance: Timing of pension salary sacrifice and employer contributions

    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?
  • RE: Annual allowance: Timing of pension salary sacrifice and employer contributions

    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.
  • Annual allowance: Timing of pension salary sacrifice and employer contributions

    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.