How will the Working Tax Credit and the Childcare Element be affected?
Employees who opt for the childcare scheme are not eligible to claim the Childcare Element of Working Tax Credit in respect of the childcare payments made under the Childcare Scheme. This is because the childcare payments are treated as being paid by the employer rather than by the employee. However, members of the Childcare Scheme may receive more Working Tax Credit and Child Tax Credit because their gross salaries will be reduced by the amount of the childcare paid and therefore their income assessed for Tax Credit purposes will be less. So, if you are receiving the Childcare Element of the Working Tax Credit then you need to check the effect of salary sacrifice on your entitlement. You may be better off retaining the Childcare Element. If you are not entitled to the Childcare Element then you are almost certain to benefit through salary sacrifice and it is possible, as salary sacrifice is actually a reduction in your salary, that this in fact increases your entitlement to other Tax
Tax Credits are another form of government childcare support provided by HM Revenue & Customs. The level of payment depends on personal family income and, therefore, we cannot know exactly how salary sacrifice may affect your entitlement. The new childcare Scheme uses salary sacrifice to save tax and NI on the nursery places and on the kidsunlimited Childcare Vouchers. This means HSBC is effectively paying the sacrificed proportion of your childcare fee. Therefore, you will not be able to include this sacrificed amount on your Working Tax Credit declaration and, if claiming the “Childcare Element” of Working Tax Credit, you will not receive any on the fee paid on your behalf by the Bank. So, if you are receiving the Childcare Element of the Working Tax Credit then you need to check the effect of salary sacrifice on your entitlement. You may be better off retaining the Childcare Element. If you are not entitled to the Childcare Element then you are almost certain to benefit through sala
