Are childcare vouchers based on salary or salary+benefits?

SuffolkOutback

Hello,

My payroll department told me I could only claim £124 a month in childcare vouchers (Rather than £243) as my salary is £38,000 and I received benefits worth £2,800 (car and private healthcare).

The benefits administrator at my work is telling me I am a higher rate tax payer, but my salary isn't anove the £41k-ish threshold, so I am very confused.

Is this right? Do the additional benefits on of my salary mean I am entitled to a lower amount of childcare vouchers?

I have tried calling HMRC but can nver get through and my payroll department are of couse the ones who have told me this information in the first place so can't check with them!

Any help would be greatly received.

Many thanks

zygurat789

You're right the HR threshold is £41,865 but what is your Code number?
£2800 for car and healthcare looks a bit of a round figure.

purdyoaten

You are correct - you are not a higher rate taxpayer. Moreover - is the £38000 before pension contributions? These would also have to be deducted from the £38000 before determining your taxable salary!

purdyoaten

Just as a matter of interest - is it up to the employer to determine whether you are a higher rate taxpayer? How do they know that you do not have a personal pension plan, large charity donation or losses at a business - all things that would reduce the possibility of paying higher rate tax. Does not sound correct to me!

SuffolkOutback

Hello, thank you for the swift responses. I was simplifying the benefits - they are actually
Company Car Benefit - £2053.04
Medical - £740.81
And yes, I pay into a company pension too.

The upshot of this is that I have had 10 months of childcare that could have all been covered by childcare vouchers (should I have been able to purchase up to £243 per month). Instead I had to cover a portion of childcare with taxed income.

Should my employer be repaying me the tax and NI I should have been able to save by using vouchers?

WestonDave

purdyoaten wrote: »

Just as a matter of interest - is it up to the employer to determine whether you are a higher rate taxpayer? How do they know that you do not have a personal pension plan, large charity donation or losses at a business - all things that would reduce the possibility of paying higher rate tax. Does not sound correct to me!

Yes in the context of the scheme - the items you quote are not relevant to the childcare voucher assessment that each employer must do. For example if you pay £100 into a personal pension outside work, that would reduce your overall taxable income but not your employment income - swapping it to paying into a workplace pension would make it effective in these calculations. Charity donations and other deductions don't qualify as it is only things which the employers payroll "sees" not outside elements. Its a slightly weird system because it is aimed at higher rate tax payers but not all the means of avoiding higher rate tax are effective in saving your full voucher allowance! The legislation requires an employer to carry out an assessment on each employee based on what their employment pays them (or provides as taxable benefits) - that forms the basis of deciding whether they get the full or reduced voucher allocation.

purdyoaten

SuffolkOutback wrote: »

Hello, thank you for the swift responses. I was simplifying the benefits - they are actually
Company Car Benefit - £2053.04
Medical - £740.81
And yes, I pay into a company pension too.

The upshot of this is that I have had 10 months of childcare that could have all been covered by childcare vouchers (should I have been able to purchase up to £243 per month). Instead I had to cover a portion of childcare with taxed income.

Should my employer be repaying me the tax and NI I should have been able to save by using vouchers?

You would appear to have a case against you employer. However, the mechanics of this are cumbersome - and across two tax years! I would be enquiring sight of the calculation which made them determine that you are HR. My money is on them forgetting to include your personal allowance. Can you answer zygurat789's question on the tax code?

WestonDave

SuffolkOutback wrote: »

Hello, thank you for the swift responses. I was simplifying the benefits - they are actually
Company Car Benefit - £2053.04
Medical - £740.81
And yes, I pay into a company pension too.

The upshot of this is that I have had 10 months of childcare that could have all been covered by childcare vouchers (should I have been able to purchase up to £243 per month). Instead I had to cover a portion of childcare with taxed income.

Should my employer be repaying me the tax and NI I should have been able to save by using vouchers?

"Should" is a difficult one - morally as they made the mistake then yes - the difficulty is that there is no obligation on employers to allow salary sacrifice voucher schemes at all so insisting that they had to allow the full sacrifice isn't necessarily possible.


Its also not as simple as handing over the tax and NI - that would be more money that would be subject to tax and NI via the payroll.


One option is to see whether the voucher scheme and your nursery will allow you to backdate vouchers, hand them over to the nursery and get a cash refund from the nursery. Some schemes allow a degree of backdating so it might be possible.

purdyoaten

WestonDave wrote: »

Yes in the context of the scheme - the items you quote are not relevant to the childcare voucher assessment that each employer must do. For example if you pay £100 into a personal pension outside work, that would reduce your overall taxable income but not your employment income - swapping it to paying into a workplace pension would make it effective in these calculations. Charity donations and other deductions don't qualify as it is only things which the employers payroll "sees" not outside elements. Its a slightly weird system because it is aimed at higher rate tax payers but not all the means of avoiding higher rate tax are effective in saving your full voucher allowance! The legislation requires an employer to carry out an assessment on each employee based on what their employment pays them (or provides as taxable benefits) - that forms the basis of deciding whether they get the full or reduced voucher allocation.

Thanks for that. Presumably nothing in the legislation to cover the employer having made a "*&*^ of it ?

WestonDave

purdyoaten wrote: »

You would appear to have a case against you employer. However, the mechanics of this are cumbersome - and across two tax years! I would be enquiring sight of the calculation which made them determine that you are HR. My money is on them forgetting to include your personal allowance. Can you answer zygurat789's question on the tax code?

The tax code point would be very relevant because if for example you had a coded restriction, that would push you into 40% at the point of assessment (which is a once a year exercise) and make the employers calculation correct. Although I'd be hard pressed to see how that would happen in two separate assessments for two tax years!

WestonDave

purdyoaten wrote: »

Thanks for that. Presumably nothing in the legislation to cover the employer having made a "*&*^ of it ?

The trouble is - the legislation is all a bit bodged together - the whole system arose as a HMRC concession to try to allow small employers to give their staff the same benefit as those big employers that had an onside free/subsidised nursery tax free. In effect by providing the vouchers the employer was paying for the nursery via a third party supplier and offsetting the cost via a salary sacrifice. There is nothing in the legislation about having to provide a minimum level of vouchers (or for example minimum opening hours for an in house nursery). So it would be perfectly legal for a voucher scheme to have an employer imposed limit lower than £243. All the law says is that if an employee is over the 40% limit the amount provided must be restricted. So we come back to the moral case for correcting their mistake.