Salary sacrifice and child benefit

(86 Posts)
mike1May Tue 05-Oct-10 18:48:54

Not sure if this is the right place to post this.

Anyway, with the salary sacrifice schemes that exist, is it possible to sacrifice enough of your salary to still be able to get the child benefit?
For example, if I earn £200 over the higher-rate tax threshold, could I sacrifice this as part of a cycle-to-work scheme, childcare voucher scheme or whatever and then be able to still get child benefit?

Sacrificing that £200 could be worth thousands.

sethstarkaddersmum Tue 05-Oct-10 18:50:55

I think so.
we may be reconsidering how much use we make of dh's workplace nursery....

WilfShelf Tue 05-Oct-10 18:52:42

What an interesting point. Dunno. But this is exactly why, when they say they won't need to means test, they will actually still have to in one way or another because it is STILL going to be very bloody complicated. And unfair.

And [SHOUTING NOW] the poor STILL won't get the bloody money, will they Gideon?


minipie Tue 05-Oct-10 19:04:33

I had exactly the same thought mike - was thinking you could do pension contributions by way of salary sacrifice to get your earnings below the 40% barrier.

If you do that then you're not "sacrificing" the money, you're putting it into your pension.

(mentioned it on one of the CB threads, can't remember which now)

nobody knowledgable responded though so will be interested to see what response you get here.

TheCrackFox Tue 05-Oct-10 19:05:54

If you are just over the threshold invest the surplus into your pension. smile

WilfShelf Tue 05-Oct-10 19:08:42

See this is one of the problem - I have no problem with any individual taking this kind of approach here - you/we are ordinary middle income families... But we're so much richer than the majority of people, and yet we have the capacity to use our wealth (because we HAVE pensions, or we can AFFORD childcare) to make use of the benefits.

Legal tax avoidance, investments, housing equity, flexible credit... it's still true that the poor pay more, one way or another...

minipie Tue 05-Oct-10 19:12:20

Wilf I do agree with you.

The answer is that the rules should be (and maybe will be) changed so this loophole doesn't exist.

But while it exists, I don't see anything wrong with taking advantage of it.

ChasingSquirrels Tue 05-Oct-10 19:13:41

it is the same with tax credits, although you don't need to salary sacrifice - the pension contributions you made reduce the income which is considered for tax credit purposes.

When you consider that you get a 20% tax relief on the pension contributions you make, and don't have the 40% (or is it 60%) reduction in tax credits per £1 then it is a bloody good idea.

WilfShelf Tue 05-Oct-10 19:14:32

No, why would you not? You'd be mad not to do it. Especially when bloody bankers are still getting 7bn in bonuses and parking their money all over the shop to avoid taxes.

greenfly Tue 05-Oct-10 19:16:35

So basically you're looking to salt money away for your benefit so you can carry on claiming. Excellent. Bet you're the type who rants on about 'benefit cheats' too.

vespasian Tue 05-Oct-10 19:17:05

I wonder if people claiming other benefits were to start such a thread if it would be called benefit fraud.

ChasingSquirrels Tue 05-Oct-10 19:18:17

personally I intend to take full advantage of the tax regime in order to minimise my outgoings and maximise my income and savings.

BelleDameSansMerci Tue 05-Oct-10 19:18:17

I wouldn't have thought you could do this as the tax threshold is based on gross pay not net, isn't it?

TheCrackFox Tue 05-Oct-10 19:18:56

fraud is illegal but paying extra into a pension isn't.

(Don't know why I care as the CB change doesn't affect me and I don't claim benefits)

ChasingSquirrels Tue 05-Oct-10 19:20:34

tax credits is gross less pension contributions.

taxable income - the level at which you start paying 4-% tax is increased to give you the additional tax relief on your pension contributions.
So if HRT was £40k (ease of numbers), you earned £45k and made £5k gross pension contributions then HRT (for you) wouldn't kick in until £45k - ie you wouldn't come into the HRT regime.

greenfly Tue 05-Oct-10 19:20:38

It may not be illegal but morally it is cheating.

WilfShelf Tue 05-Oct-10 19:21:36

Actually I'm about as lefty and anti Daily Mail as you can get, and I don't think the OP or anyone who says they might consider it would necessarily be 'the type who goes on about benefit cheats'. Perhaps. Certainly not me.

But it's a pretty defining feature of being middle class to use your resources to get more resources. Legally. It's actually Osborne and co's stupidity that will create the loophole and middle-income earners will inevitably exploit that.

And they will feel justified, however uncomfortable it might make us feel, because the Tories will not address real inequalities of poverty and wealth.

Don't attack the loopholers on 44k, please (would you think a single mother, for example, on 44k, was wrong to exploit such a loophole?); instead, I would encourage you to attack the big tax avoiders and fraudulent amongst the really rich; and the govt that is using this measure as an ideological tool to make women barefoot, pregnant and dependent again.

ChasingSquirrels Tue 05-Oct-10 19:21:39

paying into a pension is morally cheating?????????

minipie Tue 05-Oct-10 19:22:32

greenfly and vespasian I am sure that HMRC are well aware of this side effect of salary sacrifice. At present it is still legal and people are still allowed to take advantage of it. Not remotely the same as benefit fraud which is illegal and involves lying.

Only those who are just above the 40% level will want to take advantage of this idea (someone who earns £80k would have to sacrifice £35k to get below the 40% level so it wouldn't be worth it). So it only benefits a very small % of people at the bottom end of the group who have had CB removed.

TheCrackFox Tue 05-Oct-10 19:23:29

I would regard it as cheating when HRMC ask Vodafone to pay the billions it owes and when Sir Phillip Green pays his fair share too. smile

WilfShelf Tue 05-Oct-10 19:23:52

Crikey, I care about rather a lot that affects others. It won't affect me either, directly, but it will make our society and the lives of some children, a much shitter place... That affects me.

minipie Tue 05-Oct-10 19:24:03

cross posted and agreed Wilf

ColdComfortFarm Tue 05-Oct-10 19:25:14

maximise income is one thing, pretend to earn less in order to claim state benefits paid for out of taxation is quite another, surely?
I am very tired of people whose earning put them in the top 15per cent whining and whining about not being allowed to claim state benefits. I even saw some ghasty woman on the news with a baby in a ££££ pram whining about not wanting to lose her benefits because she had a baybeee. She was at the TORY CONFERENCE so presumably a tory, and therefore completely happy to see cuts for everyone else, like those pesky poor people who fall into the 85per cent of people earning less than £43K, but seemed to shocked to her core about losing out herself. Cuts, it seems, are always alright as long as they are for other people.

ChasingSquirrels Tue 05-Oct-10 19:26:09

I AM doing this, with tax credits.
I am a single mother, on £26k.

I was paying pension contributions anyway, but not as much as we were putting lots into my ex's (when he wasn't an ex) pension as he got 40% tax relief, and matched employer contributions. Paying into his instead of mine made much more sense.
He left me.
I needed to increase my pension contributions to provide for my own future.
I would have done so anyway.
An additional benefit is that my "tax credits income" is reduced and therefore I receive more tax credits.

This is the system.

Why should I feel bad about doing that?

I also paid childcare costs, and got tax credits in relation to those.
Should I feel bad about that?

greenfly Tue 05-Oct-10 19:26:22

Nonsense Wilf. Why do people always shrug the blame elsewhere? What happened to all the big talk about how we were in the mess together and had to sort it out together? As soon as a cut is announced that actually impacts on some section they instantly start bleating about how it should impact somewhere else.

Why do 'single mothers' always have to get dragged into it? A single mother on 44k is a very well-off single mother.

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