Employers pension contribution save NIC’s

Employers’ pension contributions save NICs. If your employer pays you salary or bonus which you then invest in your pension, both you and the employer have to pay NICs. But if your employer pays contributions directly into your pension scheme, the employer gets the tax relief and there are no NICs to pay – saving the employer’s NIC of 12.8% and your NICs as well. You could arrange with your employer to cover the cost of the contributions by reducing your salary or not taking a bonus you are due. But HMRC is very particular about how this should be done to be tax-effective.

Wages and salaries are payments received by an employee for performing services for an employer. Usually, any payment received for performing personal services is included in your gross taxable income on your tax return. The only exception is items specifically tax exempt, which are not included in gross taxable income. Amounts withheld from pay for income tax, Social Security tax and Medicare tax, pensions, insurance, and union dues are considered "received" and must be included in gross taxable income on your tax return in the tax year in which they are withheld.