Salary Sacrifice To Reduce NI Payments

Changes to National Insurance in April 2008, will mean that people earning over £35,000 a year, could find themselves paying more in national insurance contributions.  This will counteract the reduction in basic tax, which will be lowered at the same time, and will benefit people earning £15,000 a year or more.  

Standard Life has commented that there is a way around the increase in national insurance contributions, by using a salary sacrifice system to pay their pension contributions.  

This is an agreement between the employer and the employee, when the employee in return for a non-cash benefit provided by the employer, agrees a reduction in salary or bonus.  

This salary sacrifice could earn an employee an extra £300 to £600 a year in pension contributions and the employer would pay less national insurance contributions.  

Our view

This may work for one or two employers but f it were taken up on mass, all it would mean is that both employers and companies will pay less National Insurance meaning that the Government will have to raise taxes elsewhere.  

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