Year End Tax Review 2008 Contents New Year's resolutions Investment limits Borrowings and tax Family tax planning Mr and Mrs Give generously and save tax Jam today, or jam tomorrow? Tax payback - tax credits Bringing it back home Children's pensions? A matter of trust Children's savings? All change for gains Second homes Portfolio gains Capital ideas Tax-free perks Employee pensions and NIC Pension policies Employee cars and fuel Business tax Pay rise for the other half? Company or trade Two jobs = too much NIC Should VAT be flat? VAT and cash Inheritance tax One careful owner

Employee pensions and NIC If you are a member of an employer's pension scheme, you can contribute from your salary and get tax relief. However, your salary is subject to NIC, and that doesn't get reduced by pension contributions that you pay. The employer pays 12.8% on most salaries, and employees pay 11% up to a salary of about £40,040 (in 2008/09) and 1% after that. If the employer pays pension contributions directly into the fund on an employee's behalf, there is no income tax and no NIC. Suppose an employee has a salary of £30,000, and gets £1,000 in salary to pay into the fund. That will cost the employer £1,128, and the employee will be able to invest £890 after NIC. If the employer puts £1,000 into the fund, there is a combined benefit to both of £238. It's a very basic plan, but it needs to be done properly to make sure that the Revenue can't argue there was "really" a payment to the employee anyway - it's worth taking advice if you are going to make a so-called "salary sacrifice". Action Point! Do you make employee contributions to a pension scheme?