# Tax calculation & salary sacrifice



## Estoril-5 (Mar 8, 2007)

Hi guys, wanted to ask about salary sacrifice & how they calculate tax.

Is your tax threshold calculated on what your earnings are after your sacrifice or before?

For example, if I'm earning a total annual salary that is £325 above the threshold that charges the 40% tax rate, I.e. so only £325 is taxed at 40% and the rest at 20% minus PA.

So if I take childcare vouchers or cycle to work scheme of £330 per annum.

Would that take me out of the 40% tax bracket?


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## steviebabe0 (May 14, 2013)

Dont think its that straightforward. We seem to be assessed every month sort of thing so you dont get stung for the 40% element all in month 12 at the end of the tax year ie March. If it looks like i'm going go into that bracket early in the year our wages notify me and my tax gets adjusted so its "spread" out more evenly, at least thats how I understand it. If your only going into it by that much (little) i wouldnt worry, and would probably just increase my pension contributions by £40 a month if thats possible on a sacrifice scheme. No point getting vouchers etc if there no use to you just to avoid a small amount of tax. Only my opinion but think this is how it works at our place.


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## danwel (Feb 18, 2007)

Yes you are correct in your thoughts. Your individual tax code will play a part but for me i pay 20% on the first 36K of my earnings and anything above the 26k threshold then that is where i am subject to the 40%


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## Estoril-5 (Mar 8, 2007)

You mean 20% on £36k after your personal allowance?


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## Beancounter (Aug 31, 2006)

Estoril-5 said:


> Is your tax threshold calculated on what your earnings are after your sacrifice or before?


After 



Estoril-5 said:


> For example, if I'm earning a total annual salary that is £325 above the threshold that charges the 40% tax rate, I.e. so only £325 is taxed at 40% and the rest at 20% minus PA.
> 
> So if I take childcare vouchers or cycle to work scheme of £330 per annum.
> 
> Would that take me out of the 40% tax bracket?


Yes :thumb:


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## PaulN (Jan 17, 2008)

Increasing your pension contribution would make more sense and keep things simple... Surely you cant keep doing that though, otherwise your not going to see the benefit of future pay rises....


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## danwel (Feb 18, 2007)

Estoril-5 said:


> You mean 20% on £36k after your personal allowance?


Yes, sorry should have said, it is either 31 or 34k after the personal allowance


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## Shug (Jul 13, 2007)

Depending on what your salary sacrifice is, it could be 'benefit in kind' and subject to tax (tho less than income tax)
That could apply to things like bike or computer schemes.


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## Beancounter (Aug 31, 2006)

Childcare Vouchers and Cycle scheme (as listed by the OP) though are generally not BIK's.


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## Estoril-5 (Mar 8, 2007)

Excellent, now here's the tricky bit.

If you are a lower rate tax payer you can take £243 in childcare vouchers, if you're a higher rate tax payer you can take £140 I think or there abouts.

So if I don't take childcare I'm a high rate payer, if I do it reduces my tax threshold to lower rate, but how much can I take £243 or £140?


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## alan hanson (May 21, 2008)

I've just had my first 243 for child care but my company took it off after tax:wall: so i dont know how much i will be saving yet

i thought it was calculated on gross so you would only be allowed the 140?


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## Estoril-5 (Mar 8, 2007)

alan hanson said:


> I've just had my first 243 for child care but my company took it off after tax:wall: so i dont know how much i will be saving yet
> 
> i thought it was calculated on gross so you would only be allowed the 140?


If it's after tax, you'll save nothing or NI only.

If your limit on child care vouchers are calculated on gross I'm a bit stuffed!


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## alan hanson (May 21, 2008)

I could be and probably are wrong but i though it was on gross pay as that what the saving comes off, yep this month i saved.................nothing grrr they are amending my tax next month to give me it back, i had been asking for nearly 2 years for the scheme and said i wanted to see this months saving seen as it took so long to introduce as ive lost enough.


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## Will_G (Jan 23, 2012)

Might be worth trying one of these calculators seeing what it gives you

https://myaccount.computersharevoucherservices.com/Parent/EligibilityCalculator.aspx


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