Benefits allowance

mrbg07546

Hi where I work I get 20% benefits allowance.

we can get benefits including a shopping card which we can top off. Is it the case it’s beneficial to get the shopping card as if I took more of the benefits card as cash I would be taxed. However if I topped up a shopping card I wouldn’t be taxed?

Savvy_Sue

If this is a salary sacrifice scheme then yes, you'll pay less tax, but it's important to understand how it works. 

Suppose your 'regular' salary is £40k. You'll be taxed and pay NI on that, taking your personal allowance into account. 

But you take the shopping card. Your salary is now £40 - £8k = £32k. You'll only pay tax and NI on that. 

All brilliant, until you need a mortgage, or a reference for a landlord, or any other confirmation of your income.

Your employer may report that your salary is £32k - you'd need to ask them what their policy is on confirming salaries, some will give your 'regular' salary; some will report your salary AFTER the sacrifice; and some will report both. 

The other big one is if you want to claim any of the parental allowances (I'm guessing - perhaps incorrectly - from your username that you are unlikely to be claiming Maternity Pay, but the same would apply to any paid parental leave) - that will also normally be based on your sacrificed pay. 

AND perhaps most common of all, your employer will normally calculate what THEY have to pay into your pension on your sacrificed salary, and your default contribution will be similarly reduced. You don't just pay less in, but you also lose the tax benefit on what you haven't paid in - normally that's added to your pension pot without you ever missing it. 

mrbg07546

It’s a 10% benefits allowance on top of my salary that it gets take out of(so that’s not salary sacrifice)? I’m comfortable 40% tax payer. Sounds like a no brainer? Every 100 pound on a shopping card is only costing me around 60 quid?

Marcon

mrbg07546 said:

It’s a 10% benefits allowance on top of my salary that it gets take out of(so that’s not salary sacrifice)? I’m comfortable 40% tax payer. Sounds like a no brainer? Every 100 pound on a shopping card is only costing me around 60 quid?

What's making you think it won't be taxed/subject to NI as a benefit in kind? See https://www.litrg.org.uk/working/employment/taxable-employment-income/taxable-benefits-kind#:~:text=For%20any%20other%20non%2Dcash,Class%201%20NIC%20under%20PAYE. and read the section headed 'vouchers'.

Savvy_Sue

Marcon said:

mrbg07546 said:

It’s a 10% benefits allowance on top of my salary that it gets take out of(so that’s not salary sacrifice)? I’m comfortable 40% tax payer. Sounds like a no brainer? Every 100 pound on a shopping card is only costing me around 60 quid?

What's making you think it won't be taxed/subject to NI as a benefit in kind? See https://www.litrg.org.uk/working/employment/taxable-employment-income/taxable-benefits-kind#:~:text=For%20any%20other%20non%2Dcash,Class%201%20NIC%20under%20PAYE. and read the section headed 'vouchers'.

Thank you, it had been niggling around my brain that I couldn't think of a situation where something like this would not be taxable - only the OP has access to the full details of their employer's scheme, of course, but it's possible it's reported on a P11D annually rather than monthly through payroll.