Calculators

Group Stakeholder & Group Personal Pension Plans - Contribution Changes from 6th April 2008

1st February 2008

Clive Leah, Chairman of Shirebrook Financial Services, explains how the forthcoming cut in the base rate affects employer pension contributions.

On 6th April 2008 the basic rate of income tax goes down from 22p in the ? to 20p in the ?. This will have an impact upon the deductions for pension contributions from your employees' salaries and wages, which are made on a "net from net" basis.

In short, the deduction will increase. For example:

If an employee's current gross contribution is ?100 per month, you currently deduct ?78 from salary and pay this to the provider.

HMRC then pay ?22 directly to the provider.

From 6th April 2008 you should deduct ?80 and HMRC will send a "top-up" of ?20 thus maintaining the required gross contribution level.

March payments after 4th April

There is a potential minor "problem" relating to deductions in March which could be paid over as late as 19th April under current legislation.

For any contributions received after 6th April 2008 HMRC will use the new top-up basis - viz 25% as opposed to the current level of 28.2%.

In the example used above the top-up to the net deduction (payment) of ?78 would be ?19.50 making a total gross contribution of ?97.50 - i.e. not ?100 - if payment is received on or after 6th April.

The last working day of the Tax Year is April 4th (the 5th is a Saturday) and if member contributions reach the provider by then the current top-up will be applied - if not, the contribution (gross) will be at the lower level.

Need further help?

We hope that you have received this in sufficient time to enable you to make the necessary changes, both internally and for your payroll provider, and if you have any queries at all please contact us.

We shall be happy to help.

Group Stakeholder & Group Personal Pension Plans - Contribution Changes from 6th April 2008

March payments after 4th April

Need further help?

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