The main changes to corporate reporting are as follows:
All pension deductions are tax-free, but there are two ways to set this up in your payroll:
If you were operating a relief-at-source scheme, Joanna would have £59.52 deducted each month and paid to the scheme and then £14.88 added by HMRC.
If you were operating a net-pay arrangement, Joanna would have £74.40 deducted each month and paid over.
The net impact for basic-rate taxpayers like Joanna is the same: the same amount ends up in her pension pot and the amount she takes home is the same. Under a net-pay arrangement, she makes a bigger pension contribution but her income tax deduction is then £14.88 lower.
It does make a difference if your employees are either below the basic-rate threshold – like Sudip – or are higher-rate taxpayers.
Relief-at-source arrangements are better for non-taxpayers, as they get 20% added to their pension, whereas net-pay arrangements are better for higher-rate taxpayers as they automatically get the full amount of tax relief through payroll.
Higher-rate taxpayers in a relief-at-source arrangement can get the tax relief back, or claim it through self-assessment.
Non-taxpayers, however, have no equivalent workaround in a net-pay arrangement. Some pension providers offer employers a choice which method to use, whereas others specify one.
It does not make a difference to your costs as you are still paying 3% in either scenario, but knowing which method you are using enables you to explain it to your employees.
Another option is to operate a salary sacrifice scheme, whereby part of the worker’s salary is swapped for pension contributions.
This saves both you and your employee tax, but has potential complications. Seek expert advice before setting this up.
New employers are required to provide certain information to the Pensions Regulator within five months, even if none of your employees are entitled to join a scheme.
At the third anniversary of setting up a workplace pension scheme, you must:
You need to tell a new worker about the scheme, how it operates, how they can join and whether you operate any postponements. You also must tell them if you have postponed them. more https://oxonaccountancy.co.uk/employer-issues-with-auto-enrolment/
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