Page 7 - Budget Newsletter November 2022
P. 7
Planning point
Lower NIC rates reduce the overall gain from using salary sacrifice to make pension
contributions. However, substantial benefits remain, as the table below shows:
Salary sacrifice
employer
Personal contribution
contribution (sacrificed amount +
NIC saving)
Tax rate 20% 40% 20% 40%
£ £ £ £
Gross salary 1,000 1,000 Nil Nil
Employer pension contribution Nil Nil 1,138 1,138
Employer NIC (13.8%) 138 138 Nil Nil
Total employer outlay 1,138 1,138 1,138 1,138
Employee salary 1,000 1,000 Nil Nil
Less:
income tax (200) (400)
NICs (12.00%/2.00%) (120) (20)
Net pay = net pension 680 580
contribution
Tax relief 170 386.67
Total pension contribution 850 966.67 1,138 1,138
Gain 33.9% 17.7%
Jeremy Hunt also confirmed that the Government would retain the Employment
Allowance at its new, higher level of £5,000. Employment Allowance is an entitlement for
businesses, charities, and amateur sports clubs towards their employer (secondary) Class
1 NICs liability. (It’s not available if a director is the sole employee or if the previous tax
year’s secondary NICs were £100,000 or more.)
Employment Allowance
2022/23 2023/24
Per business £5,000 £5,000
Raymond James Budget Newsletter November 2022 6
