Employer limiting childcare voucher value

MX5huggy

Hi,

I have been receiving childcare vouchers for just over 1 year as salary sacrifice.

I applied to sacrifice the full £243, but was told I could not as this would reduce my wage below national living wage so was only allowed £200 per month in vouchers.

Is this right?

It's a BIG public sector employer

choccielover

Yes you can't sacrifice below national min wage. Pension or CCV I believe.

PeacefulWaters

Oddly enough they have to pay you minimum wage or more.

Vouchers don't count.

Mupette

If the vouchers make you go under NMW then HMRC state that you can't have the value you want.

Your employer is right.

MX5huggy

OK I've found some HMRC guidance now.

Maybe it made sense when the NMW was at or close to the personal allowance for full time salary but not now.

If you earn £7.50 (NLW) for 40 hours a week (£15600 pa) you cant get any tax relief of the £4000 you earn over the personal allowance. So you pay £800 in tax + NI

Yet if you work 20 hours a week for £15 per hour (also £15600 pa) you can claim child care, pension contributions and even cycle to work etc and reduce your tax to £0.

I'm i missing something or do i need to write to Phil and MP?

Personally looks like i should change to the new scheme for the child care and then make shared cost pension AVC's to the NLW limit.

onlyroz

But if you work 20 hours for one employer you could also work 20 hours for another employer. Either way, neither employer is allowed to pay you less than the minimum wage for your time.

silvercar

I'm i missing something or do i need to write to Phil and MP?

You're comparing things that shouldn't be compared.

Personal tax allowances and childcare vouchers were never intended to interrelate.

MX5huggy

silvercar wrote: »

You're comparing things that shouldn't be compared.

Personal tax allowances and childcare vouchers were never intended to interrelate.

Not intended to but now are. The less you're paid the more tax you pay because you are stopped from taking advantage of salary sacrifice schemes, not generally the accepted principle.

PeacefulWaters

MX5huggy wrote: »

Not intended to but now are. The less you're paid the more tax you pay because you are stopped from taking advantage of salary sacrifice schemes, not generally the accepted principle.

Sometimes it's just tough.

Annoying. But tough.

spadoosh

MX5huggy wrote: »

OK I've found some HMRC guidance now.

Maybe it made sense when the NMW was at or close to the personal allowance for full time salary but not now.

If you earn £7.50 (NLW) for 40 hours a week (£15600 pa) you cant get any tax relief of the £4000 you earn over the personal allowance. So you pay £800 in tax + NI

Yet if you work 20 hours a week for £15 per hour (also £15600 pa) you can claim child care, pension contributions and even cycle to work etc and reduce your tax to £0.

I'm i missing something or do i need to write to Phil and MP?

Personally looks like i should change to the new scheme for the child care and then make shared cost pension AVC's to the NLW limit.

The potential earning of someone getting paid £15 per hour are more than someone paid £7.50 an hour.

So comparing full timers.....

£15600 (tax £818.20 or 5.2% of earnings)

and

£31200 (tax £3938.20 or 12% of earnings).

Personally i think it reasonable those who potentially have the most to pay have access to the better tax relief options.

You can choose to pay very little tax. Just leave your job. Ok it might not be an option for you but theres people who do do it. Some people only want to earn £15k a year, some can do that working a few hours a week and others will need to work 40 hours a week.