Salary sacrifice?

jilt

Just want to check something out. My client has deductions from her salary with the narrative 'PaySave MP' I believe these to be what is known as a salary sacrifice. I checked with her and as I thought they are pension contributions of 4% of her basic salary, these are deducted every month.

These deductions aren't included in the pay to date on her P60. Just wanted to check that this allowable and I am correct that I simply use the pay figure from her P60 and don't have to show the pension contributions anywhere else on her tax return.

I'm also wanting to check that her tax code is correct as she's on a K code and am not that knowledgable with such things, does anyone know of any short courses to that might help me feel me confident?

deanshepherd

It does sound like salary sacrifice pension contributions so, yes, ignore it completely for the tax return (as they are considered employer contributions) and enter the figures from the P60. Might be worth a quick buzz to their HR department just to confirm that is the case.

Either you or her should have been sent the coding notice. If not, just call up HMRC and they will run through what is included over the phone. The reason it will be a K code is that the deductions outweigh the allowances. Maybe she has a lot of employee benefits (company car, medical insurance) or that her allowances have been put elsewhere (another employer or private pension perhaps). Of course HMRC could have just made a mess of the code but at least she will get a nice refund via her tax return if so!

jilt

Thanks Dean you're a star as always. I know that a K code is correct but want to make sure that the numerical part of it is right, her total income exceeds £100k and she receives benefits but they'be included an 'underpayment restriction' in it which we think refers to some income from self employment.

deanshepherd

An underpayment restriction usually relates to an earlier year. Either where on completing the tax return (probably 2008/09) there was tax to pay and the option was ticked to collect via the PAYE code or where HMRC have themselves looked back and corrected an earlier year perhaps because coded benefits didn't match the P11D.

I have also seen it used where HMRC are just randomly restricting the code because they are anticipating other undertaxed income which for a higher rate taxpayer is most likely extra tax due on savings and investments. Your client is perfectly within their rights to get such a restriction removed if they want. I often leave it in because I prefer to tell a client about a refund due rather than extra tax to pay.

Again, HMRC should be able to confirm over the phone which applies in this case.