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If someone makes high enough pension contributions, or a has a very high income, they may need to worry about the annual allowance.

They need to add up all both employee and employer pension contributions for an entire tax year to check if they've exceeded the allowance.

Many people have employers that directly make pension contributions for them, and also operate a salary sacrifice scheme to allow the employee to make contributions that save both tax and national insurance.

If contributions are recorded in one tax year but received by the pension scheme in the next tax year (e.g. they show on a March payslip but received after April 6th), which tax year do they apply to for annual allowance purposes?

Ganesh Sittampalam
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1 Answers1

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Both the contributions coming direct from the employer, and the ones made via salary sacrifice, count as employer contributions and should be counted in the tax year the scheme receives them.

It's surprisingly hard to get a clear answer on this from HMRC. Multiple people have asked on the HMRC community forums [1,2].

Answers often point to PTM041000. However, that doesn't explicitly talk about salary sacrifice, and some of the answers from HMRC confuse net pay and salary sacrifice. Net pay is not the same thing as salary sacrifice.

I ended up asking HMRC on Twitter and challenging the initial answer. I'm now reasonably confident that their final answer is valid - salary sacrifice is really an employer contribution so the payslip date isn't that relevant.

This answer is also consistent with how pension providers seem to view it. One of the forum posts above mentions someone having asked Aviva, and it's also what I see in my own employer pension. Since they are responsible to provide a statement if you go over the standard allowance and sometimes to directly pay the charge out of your pension, it also makes sense to be consistent with their view.

Ganesh Sittampalam
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