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What happens if I am entitled or may be entitled to Working Tax Credit (WTC) or Child Tax Credit (CTC)?

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What happens if I am entitled or may be entitled to Working Tax Credit (WTC) or Child Tax Credit (CTC)?

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Working Tax Credits and Child Tax Credits are calculated on your Post-Salary Exchange Pay and the value of your childcare vouchers is ignored for this calculation . Under WTC it is possible to receive help with the cost of childcare, the “childcare element” of WTC. If you are receiving Childcare Vouchers under this arrangement you will not receive any help towards the face value of the Childcare Vouchers you have received. If you qualify, you will only be entitled to the “childcare element” of WTC to the extent that you pay for qualifying childcare using your wages or salary and not with Childcare Vouchers. For example if you enter into a “salary exchange” arrangement and receive Childcare Vouchers worth £55 in a week and yet your child carecosts are £80 a week, then you will pay the balance of £25 out of the pay or salary you are paid. You may be entitled to receive a payment under the “childcare element” of the WTC dependent upon your personal circumstances, which will be calculated

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Under the ‘childcare element’ of WTC it is possible to receive help with the cost of childcare. If you enter into a “salary sacrifice” scheme, the calculation of how much in tax credits you receive is based on your reduced cash salary or wage and any childcare vouchers received will not be used in the calculation of tax credits. So, if you receive childcare vouchers through this scheme any contributions in the form of the ‘childcare element’ of WTC will not be based on the full childcare costs. The ‘childcare element’ of the WTC contribution will be calculated on the childcare costs remaining after the childcare vouchers have been deducted.

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The Child Tax Credit (CTC) offers financial support with general family costs. Working Tax Credit (WTC) supports individuals on lower incomes, where working parents may be eligible for additional help towards (registered) childcare costs. The amount of credit you receive depends on a number of factors including income, size of family and amount paid in childcare. The receipt of childcare vouchers through a salary sacrifice scheme can affect your entitlement to these tax credits as follows: Where your average earnings have effectively been reduced, you could receive a higher payment through the WTC. However, the value received in childcare vouchers from an employer cannot be considered as childcare costs when calculations are made for your entitlement to the childcare element of WTC (this would be claiming twice for the same benefit). The childcare element of WTC may therefore be reduced. It is advisable for you to find out what level of support you could be entitled to through the CTC

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