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| Personal and Stakeholder Pensions – Saving NI Contributions |
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TaxationWeb by Peter Arrowsmith, FCA A useful NIC tip for employees with personal pension plans, by Peter Arrowsmith, FCA The current personal pension (and stakeholder personal pension) regimes allow contributions to be paid by either the employer or the employee. Normally, it is employee contributions that are paid.Where it is desired to make an employer contribution, it is important to establish that what is paid is indeed an employer contribution and not an employee’s contribution settled by the employer. The infrequency with which employers contributions are paid into such plans makes it easy to overlook the correct procedure and it is tempting – but costly – to shortcut things. Employee’s contributions are paid net of tax and any attempt by the employer to pay such a contribution will therefore cause difficulties on that front. In addition, there will be a Class 1 (not Class 1A) National Insurance contributions liability on the payment because the employer has discharged the employee’s own debt. However unfair this might seem to an employer, arrears in respect of transactions can, and will, be collected on compliance visits. A true employer contribution will be paid gross, with relief obtained through the Schedule D computation, and will attract neither a Class 1 nor a Class 1A National Insurance contribution liability. Insurance company application forms contain separate sections for employee contributions and employer contributions. Get the paperwork right, and save hassle and money! |
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About The Author  Mark McLaughlin is TaxationWeb's Co-Founder, Director and Technical Editor. He is a Fellow of the Chartered Institute of Taxation and a member of the Association of Taxation Technicians and the Society of Trust and Estate Practitioners. He lectures on tax subjects, is co-author of Tottel's IHT Annual and Ray & McLaughlin's IHT Planning, and Editor of Tottel's Tax Planning and Annual series. Mark's work has also been published in Taxation, Tax Adviser, Tolley's Practical Tax, Tax Journal and Simon's Weekly Tax Intelligence. Since January 1998, Mark has been a consultant in his own tax practice, Mark McLaughlin Associates, which provides tax consultancy and support services to professional firms. He publishes a regular 'Tax Update' e-Newsletter for clients and other professional firms. To receive future copies, contact Mark via his website. |
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Article Added Saturday, 09 August 2003 | 6149 Hits |
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