- Scottish Government ruling means rates of Income Tax in Scotland will start to vary from the rest of the UK
- Certain employees will not receive full Income Tax relief entitlement on pensions and will need to reclaim monies from HMRC, unless employers have a Salary/Bonus Sacrifice programme
LONDON (27 March 2018) - Aon Employee Benefits, the UK health and benefits business of Aon plc (NYSE:AON), has said that changes to the rates of Scottish Income Tax will directly impact certain employees who, from April, will not receive their full Income Tax relief entitlement on pension contributions and will need to start reclaiming monies directly from the HMRC. Employees earning between £24,001 and £43,430 are impacted unless their employer operates a Salary/Bonus Sacrifice programme which automatically remits employee pension contributions at source.
Richard Strachan, Scottish Regional Director of Aon Employee Benefits, said:
“Currently, all UK pension providers’ administration systems are set to apply basic rate tax relief of 20% and they say this will continue for the 2018/2019 tax year. This means these systems won’t single-out Scottish employees impacted by the changes, and whilst HMRC has confirmed that they’ll permit those earning under £13,850 to receive Income Tax relief, those earning between £24,001 and £43,430 will not receive their full entitlement.
“Employees can reclaim their entitlement, either through self-assessment or by writing to HMRC with a Certificate of Contribution which is available from their pension provider. This process isn’t terribly onerous, but as many individuals will not have had reason to deal with HMRC or their pension provider previously, it may become confusing or difficult. I suspect it will mean many won’t reclaim their entitlement, leaving them short-changed.”
Aon says that employers with a Salary/Bonus Sacrifice programme already have a default method for remitting employee pension contributions so their employees won’t be impacted by the tax change complexities. These employees will receive full tax relief at source, as well as potentially pay less National Insurance (if they pay National Insurance). Employers who have implemented, or decide to implement a Salary/Bonus Sacrifice programme, will also help to reduce their liability to employer National Insurance, helping offset implementation costs.
Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.