Tech Salary Sacrifice & Universal Credit

hoskins96

I have a scheme at work where I am able to receive some vouchers for work for curry’s as I’m in need of some white goods this would be helpful, myself and my partner are also receiving Universal Credit. The voucher scheme says it takes the money off my salary and I pay less National Insurance. 

My question is will this make my monthly universal credit payments increase as I will be taking home less or will it not affect it at all? 

poppy12345

UC is based on net earnings. This means that you won't receive anymore UC because the deductions.

calcotti

poppy12345 said:

UC is based on net earnings. This means that you won't receive anymore UC because the deductions.

I think the UC will go down. UC uses gross earnings less income tax, NI and pension contributions. If the vouchers mean that the NI goes down then the net earnings for UC purposes will increase and therefore the UC will increase. Say the OP saves £10 on NI they will then lose £5.50 of that in UC.

poppy12345

calcotti said:

poppy12345 said:

UC is based on net earnings. This means that you won't receive anymore UC because the deductions.

I think the UC will go down. UC uses gross earnings less income tax, NI and pension contributions. If the vouchers mean that the NI goes down then the net earnings for UC purposes will increase and therefore the UC will increase. Say the OP saves £10 on NI they will then lose £5.50 of that in UC.

Thanks calcotti, i didn't think of it that way.

Grumpy_chap

I am not as knowledgeable as @calcotti on the benefits, but I read the OP could take advantage of a Salary Sacrifice scheme and that means the NI (and tax) only goes down because of the salary going down by the amount of SS.  It used to be the case that these SS schemes to provide IT equipment were also not subject to a BIK.  That rule may have changed so the OP should confirm with the scheme provider.

My wife was offered an IT equipment SS scheme with a previous employer and that worked that the IT equipment was leased, say £50 per month, but the lease was met from gross salary through SS so no tax or NI on that element.  There was no BIK on the IT-lease cost either, so the effect was that gross earning reduced which resulted in the lower NI & income tax.

I am not sure if I explained this well, but using Calcotti's approach, the gross earnings are unchanged less a reduced deduction for income tax, NI and pension.

Using the way my wife's scheme worked, gross earnings reduced which is why income tax, NI and pension contributions reduced.  This might have a different outcome to that of Calcotti's approach.

It is important the OP knows exactly how the salary will be processed with the salary, NI, income tax, pension to determine the impact on UC.

Grumpy_chap

It looks like the rules may have changed for tech-SS schemes so there is now a BIK and the only saving is NI.  Based on this one sample scheme found online:

https://www.techscheme.co.uk/how-it-works

https://help.techscheme.co.uk/article/149-what-is-salary-sacrifice-and-how-is-it-applied

That says that salary reduces so tax and NI is avoided but there is now a BIK charge.  The OP's scheme may have slightly different rules but these types of schemes all tend to work in a very similar way at any one time.

That could make it more complex as, if the BIK is not collected until next tax year after the purchase period, the result coudl be two stage:

Year 1 - lower salary, lower income tax, lower NI, lower pension contributions

Year 2 - base salary, base NI, base pension contributions, higher income tax against the BIK.

Year 3 - return to normal status quo

calcotti

Grumpy_chap said:

I am not as knowledgeable as @calcotti on the benefits, but I read the OP could take advantage of a Salary Sacrifice scheme and that means the NI (and tax) only goes down because of the salary going down by the amount of SS. 

I see what you mean. If the vouchers come off before the payroll then the gross salary will show as less less the net earnings will be less so UC would actually go up.

NedS

Ultimately it will depend how the employer reports the data to HMRC, who then share that data with DWP/UC. They should report the full gross salary with the voucher as a separate deduction with will not count  for UC purposes. The fact you've paid less NI will likely mean you will receive slightly less UC as the salary for UC will be gross salary (with no deduction for voucher) - tax, pension conts and NI, so your salary for UC will actually be higher as the deduction for NI is now lower. Overall you should be slightly better off due to the NI savings more than compensating for any loss of UC.