Summary
When creating a contribution from Employed Income or Self-Employed Income to an Uncrystallised fund or Flexi-access drawdown, Timeline automatically treats this as a salary sacrifice arrangement.
This means the contribution is made before tax, reducing the taxable income in the plan.
Description
When you select Employed Income or Self-Employed Income as the contribution source and choose a pension account type (Uncrystallised or Flexi-access drawdown) as the destination, Timeline applies salary sacrifice rules automatically.
The contribution amount is deducted from the gross income before tax is calculated.
A context-aware message appears below the Contribution source field:
Pension contributions are deducted from gross salary under a salary sacrifice arrangement.
Example
If a client earns £3,000 per month and contributes 5% (£150) to their pension:
The contribution (£150) is deducted before tax.
Tax is applied only to £2,850.
This ensures the client’s plan correctly reflects the tax advantages of salary sacrifice pension contributions.
Conclusion
The salary sacrifice rule applies only to contributions made from earned income (Employed or Self-Employed) into a pension account, such as Uncrystallised funds or Flexi-access drawdown. Tax calculations are automatically updated to reflect the reduced taxable income resulting from the pension contribution, ensuring plans accurately model the benefits of salary sacrifice.