Nursery salary sacrifice and mortgage application - not sure mortgage lender gets it!

[Scotsgirl80tto]

Hi all - wondering if you can help.

I'm in the process of applying for a mortgage. The lender takes the gross salary into account and also asks out outgoings - including childcare costs. I pay our childcare costs through a salary sacrifice scheme with work- which involves my employer deducting the monthly nursery cost from my gross pay - which means I pay less tax and NI overall. The point of the scheme is that you make a saving as you're paying less tax and NI as the nursery cost is deducated from my gross.

The scheme means that instead of paying £1000 for our monthly nursery costs we are in effect paying £600 due to the reduction in NI and tax.

So when the lender asks me how much I pay for childcare what should I say? There is a line in my payslip that shows the full nursery cost deduction (the £1000) but it obviously doesn't evidence the saving I am making from the reduced tax and NI (you have to work it out iyswim).

How do I articulate this to the lender so they can understand that the actual cost to us is 600 per month not 1000? I hope I'm explaining this properly!

Appreciate every lender is different, and we used a broker who was great at relaying messages like the above with the correct context, but I think you’ll need to say £1,000.

A lender will ask for your payslips to confirm gross pay, and also take home pay post tax to get your monthly income figure. They’ll then likely ask for 3 months of bank statements so they can corroborate the outgoing expenses you’ve given for. I don’t think this will be a major issue as ultimately they should be looking at that take home post tax amount on the payslip.

Thanks @SEL0ndon trouble is they don't look at take home pay, apparently, only gross.

It's not possible to get tax relief on £1k pcm; the absolute max is £243 pcm and even that is now unusual as you had to be in the childcare voucher scheme before it stopped some years ago. So unless you have a nursery actually operated by your employer, your cost is likely to be more than £600.

She is a nurse though. Many hospitals do indeed run their own nurseries.

Not sure what you mean @NeedingCoffee . It's a tax efficient way of paying for nursery - as the amount is taken off from pre tax salary (and paid directly to the nursery) and I pay less tax and NI overall as a result - saving me £400 a month. Not sure what the childcare voucher scheme is.

They will look at the payslips and ask for clarification if needed.

nhs payslips are a bit more complicated than most but it’s nothing a lender will not be used to.

put down how much you pay out for childcare.

This is a different scheme. The scheme OP is referring to is a private benefit that the employer has to sign up to.

We do salary sacrifice at work and HR will write a letter for the purposes of getting a mortgage that states annual salary is xxx salary sacrifice is xxxx reducing gross to xxxx.

Ask HR if they'll do the same.

Is OP a nurse / NHS? I can't see that in the OP.

OP, when I remortgaged I showed my payslip showing both my gross and net pay, and then for childcare costs I said £0, and just put in writing that the childcare costs were £0 as they were already deducted from my salary. Including them would have meant they were counted twice.

Isn't the point of salary sacrifice that you reduce your salary in exchange for a non-cash benefit? In this case, surely it is the employer who is meeting the £1000 childcare cost out of the money you have sacrificed. I'd be putting £0 for childcare costs, but if there is a section for additional information disclosing the salary sacrifice arrangement.