Year End Tax Review 2009/2010 Contents Lead articles The year ahead... This year, next year Pension hit Employees Too much NIC NIC and pensions Company cars Tax-free benefits Business - General Time to incorporate? His and hers Family bonus Profit and loss Show me the money Can't pay, won't pay? Turning back the clock Business - VAT Standard VAT or flat VAT? VAT goes down - must come up? European revolution A good start for VAT Happy returns? Investments Top-up savings Rainy day money Capital Gains Gains favoured Splitting gains A place in the country Holiday lets end Families Family fortunes Where there's a Will Credits and debits Piggy banks Still trustworthy? Administration Penalty shoot-out Paperwork, paperwork Pay tax later Opportunity knocks again Charity Give and save Non-Domiciled People Home and away Interest Interesting times

NIC and pensions 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 £43,875 (in 2009/10) 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 directly into the fund, there is a saving of £128 and £110 - a combined benefit 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?