[UK] HMRC clarifies regulations on pension contributions and salary sacrifice

In the UK, regulations surrounding pension contributions and salary sacrifice have been clarified by HMRC following a question on social media, Yahoo reports.

The tax authority was asked, "If salary sacrifice would take me below NMW [National Minimum Wage] can the employer cap my sacrifice to NMW and if so do they still have to comply with pension minimum contribution of 8% in total?"

Under auto-enrolment rules, employers are reportedly required to enrol workers into a workplace pension scheme. They must ensure that at least eight per cent of the worker's earnings go towards the pension pot.

In response to the question HMRC said, "A salary sacrifice arrangement must not reduce an employee's cash earnings below the National Minimum Wage (NMW) rates."

Highlighting an important restriction the tax authority said, "Employers must put procedures in place to cap salary sacrifice deduction and ensure NMW rates are maintained.

"The specifics depend on the type of scheme arrangements in place and you will need to check this with your employer."

In addition, HMRC directed the individual to a guidance page for more information on salary sacrifice, according to Mirror reporting. If an employee chooses to join a salary sacrifice scheme, it must reportedly be added to their employment contract.

The Government's advice states, "The impact on tax and National Insurance contributions payable for any employee will depend on the pay and non-cash benefits that make up the salary sacrifice arrangement.

"You need to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits you provide.

"For the cash component, that means operating the PAYE system correctly through your payroll."

Source: Yahoo

(Links and quotes via original reporting)

In the UK, regulations surrounding pension contributions and salary sacrifice have been clarified by HMRC following a question on social media, Yahoo reports.

The tax authority was asked, "If salary sacrifice would take me below NMW [National Minimum Wage] can the employer cap my sacrifice to NMW and if so do they still have to comply with pension minimum contribution of 8% in total?"

Under auto-enrolment rules, employers are reportedly required to enrol workers into a workplace pension scheme. They must ensure that at least eight per cent of the worker's earnings go towards the pension pot.

In response to the question HMRC said, "A salary sacrifice arrangement must not reduce an employee's cash earnings below the National Minimum Wage (NMW) rates."

Highlighting an important restriction the tax authority said, "Employers must put procedures in place to cap salary sacrifice deduction and ensure NMW rates are maintained.

"The specifics depend on the type of scheme arrangements in place and you will need to check this with your employer."

In addition, HMRC directed the individual to a guidance page for more information on salary sacrifice, according to Mirror reporting. If an employee chooses to join a salary sacrifice scheme, it must reportedly be added to their employment contract.

The Government's advice states, "The impact on tax and National Insurance contributions payable for any employee will depend on the pay and non-cash benefits that make up the salary sacrifice arrangement.

"You need to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits you provide.

"For the cash component, that means operating the PAYE system correctly through your payroll."

Source: Yahoo

(Links and quotes via original reporting)