|
The government is making tax and national insurance changes that will come into effect in the new tax year 2008/09, beginning 6 April 2008.
Changes to National Insurance (NI) payments will only affect you if you currently earn more than £34,840. In the tax year 2007/08, those earning more than £5,200 pay 11% NI on earnings up to a cap of £34,840, and 1% on earnings above this cap. From 5 April 2008 the cap is set to rise to nearly £40,000 meaning you will pay 11% NI on the extra £3,900.
What action do I need to take?
Harsant Pension would advise you to consult your independent financial adviser, who will apply these changes to your personal circumstance.
Things to consider
Now is a good time to review your pension payments and the changes to basic rate tax relief and National Insurance may influence your decision.
Salary Sacrifice
You may reduce the National Insurance that both you and your employer pay by coming to an agreement with your employer to sacrifice salary for pension.
Rather than the employee making contributions to their pension scheme on which they will have paid national Insurance the pension contribution is made by the employer. This is in return for sacrificing part of the employee's gross pay. This allows the employer to make National Insurance contribution savings of 12.8% on the part of the employee's gross salary being sacrificed.
The employee meanwhile, sees a reduction in the amount of tax and National Insurance they would have paid had part of their salary not been sacrificed. Many employers will also agree to enhance the employee's pension with all or part of the 12.8% National Insurance saving that the company has made.
Please Note:
The information given here is based on our understanding of law and the changes due to be imposed by HM Revenue & Customs from 6 April 2008. Tax relief may alter and its value depends on your financial circumstances.
|
