Salary Sacrifice and Tax Credits

corbyboy

I am looking at participating in the NHS car leasing scheme paid for by salary sacrifice.

My wife is expecting our first baby next month and I have been warned that any tax credits we are entitled to will be affected.

Between us we earn £38,000 so I am expecting a low rate of child tax credits anyway.

Can anybody explain how me reducing my income via salary sacrifice will affect how much we are entitled to?

Thanks

karenx

You will only get the basic rate which is £545 per year. Double that untill baby is 1

corbyboy

I didn't think salary sacrifice would make any difference to our tax credit entitlement as we weren't expecting to get much anyway.

But just out of interest, what is the general effect of salary sacrifice on tax credits on a lower salary? To my way of thinking, if you are reducing your take home pay, surely that would entitle you to more tax credits? Or am I looking at it the wrong way?

[Deleted User]

You're looking at it wrong. You have to declare to Tax Credits any benefits paid in kind by your employer before they pay your salary that includes car lease schemes, fuel, child care vouchers and lots of other stuff.
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCreditsandChildBenefit/TaxCredits/Gettingstarted/Claimingtaxcredits/workoutincomeandworkinghours/DG_172877

kerry13238

cause you earn over i believe the limit is £25000 or something then it doesnt make a difference if you were on less than that i might. but i am sure even if you did earn less you have to declare salary sacrifice anyway so you prob wont get anymore any way