NHS salary sacrifice... is it worth it?

Haggisman · 13 Nov 2015 at 11:50

JOSH86 said:
not sure it's worth it for a PS4, surely you can just save up for it?

I can sort of see the "don't buy it if you can't afford it" argument, but at the same time, why save up for it when it will cost less to get it now through this scheme?

dowie said:
How do they justify this?

I mean I can understand the relevance when it is a season ticket loan or a bike for getting to work... but why is a PS4 allowed - if you can get a PS4 then what is to stop some employer setting up a scheme for employees to put all their spending on electronics through such a scheme?

Yeah, I was wondering this - I would have thought there would be strict criteria on what could be available through a salary sacrifice scheme, if you can get purely luxury items on salary sacrifice, why not have your mortgage/rent through it as well? And your grocery shopping etc... :confused:

One More Solo · 13 Nov 2015 at 11:51

dowie said:
can anyone who works in tax explain this?

I understand that stuff like bikes, child care vouchers, season tickets can be bought pre-tax in this way... I've never heard of consumer electronics being allowed?

Probably no different to the gift voucher mechanism, you'll need to pay NICs on it but not tax. I'm not a tax expert by any means so someone can feel free to correct me...

dowie · 13 Nov 2015 at 11:52

One More Solo said:
Probably no different to the gift voucher mechanism, you'll need to pay NICs on it but not tax. I'm not a tax expert by any means so someone can feel free to correct me...

sorry but that doesn't explain anything - point was how can consumer electronics(or indeed gift vouchers!) be justified?

glenimp617 · 13 Nov 2015 at 11:54

for those that don't know, lots of companies offer a salary sacrifice scheme whereby they buy an item for you, and you pay it back by 12 monthly payments 0% through your wages.

Nothing to do with tax, if it's a £300 console, you pay £300 back

lad at work has just done it on a laptop

it saves you having to take out a buy now pay later loan

dowie · 13 Nov 2015 at 11:54

Haggisman said:
Yeah, I was wondering this - I would have thought there would be strict criteria on what could be available through a salary sacrifice scheme, if you can get purely luxury items on salary sacrifice, why not have your mortgage/rent through it as well? And your grocery shopping etc...

why not draw down your salary to minimum wage in the form of curries vouchers and then flog them all on ebay for a small haircut?

seems like a rather blatant loophole

actually screw it - why not do the 90s banker thing all over again and get paid in platinum sponge... I'll earn minimum wage and I'll have my platinum via salary sacrifice please

Josh · 13 Nov 2015 at 11:55

Haggisman said:
I can sort of see the "don't buy it if you can't afford it" argument, but at the same time, why save up for it when it will cost less to get it now through this scheme?

I get that for bigger items like a TV that would cost around £1000ish, something that I would class as a big purchase etc, but a console - it just doesn't seem worth the salary sacrifice for a £300 item.

I dunno, put in the same position tbh I probably would take up the offer if I really wanted a console.

One More Solo · 13 Nov 2015 at 11:55

dowie said:
sorry but that doesn't explain anything - point was how can consumer electronics be justified?

https://www.gov.uk/expenses-and-benefits-a-to-z

It's just a non-cash benefit, I'd assume your salary is adjusted so you instead of being paid £1000 cash a month, you get paid £975 cash and £25 PS4. You pay tax and NICs on the cash and just NICs on the PS4.

As for people asking why you don't pay your rent etc pre-tax, some people do. Again, you would pay NICs on the taxable value of the benefit.

savagesam117 · 13 Nov 2015 at 11:55

My dad has done this and got a £2000 gaming laptop. It works out really cheap so it was a bit of a no brainier for him as it gives him longer to save for decent PC parts!

drumlegend · 13 Nov 2015 at 11:57

dowie said:
depends how you do it - but regardless that would be a naff benefit

still I'm not seeing how consumer electronics would be justified - would be very interested if someone who knows how these schemes work could provide an explanation

Also curious

dowie · 13 Nov 2015 at 11:59

One More Solo said:
https://www.gov.uk/expenses-and-benefits-a-to-z

It's just a non-cash benefit, I'd assume your salary is adjusted so you instead of being paid £1000 cash a month, you get paid £975 cash and £25 PS4. You pay tax and NICs on the cash and just NICs on the PS4.

As for people asking why you don't pay your rent etc pre-tax, some people do. Again, you would pay NICs on the taxable value of the benefit.

Yes I understand how paying for something pre-tax would work - I'm just not so sure how consumer electronics are justified? Sorry but you've still not explained anything with that post.

There are some rather obvious ways of exploiting this if you could just put all your spending through a company.

glenimp617 · 13 Nov 2015 at 12:00

completely forgot about paying tax on a less amount due to the loan

mmmmmmm, might have a look for a laptop myself now lol

drumlegend · 13 Nov 2015 at 12:00

My understanding is as you get paid less you actually pay less tax. So you are saving by doing it.

glenimp617 · 13 Nov 2015 at 12:01

drumlegend said:
My understanding is as you get paid less you actually pay less tax. So you are saving by doing it.

runs to the laptop outlet store

Greebo · 13 Nov 2015 at 12:07

One More Solo said:
https://www.gov.uk/expenses-and-benefits-a-to-z

It's just a non-cash benefit, I'd assume your salary is adjusted so you instead of being paid £1000 cash a month, you get paid £975 cash and £25 PS4. You pay tax and NICs on the cash and just NICs on the PS4.

As for people asking why you don't pay your rent etc pre-tax, some people do. Again, you would pay NICs on the taxable value of the benefit.

Thats not what i'd call "salary sacrifice". Salary sacrifice is where the cost is taken off gross and the employee saves the tax and NI but this only applies to certain items and certainly not a PS4. Can be hugely beneficial for things like computers as savings are roughly 33%.

Of course a salary sacrifice scheme can be set up so a person can have a PS4 but the employee will still have to pay the tax and NI on the amount deducted. I hoep this is made clear to employees in the NHS buying PS4's?

In the Op's case on top of the £28 a month he will have approximately another £8 or £9 a month to pay to HMRc for the tax and NI.

The only thing you are gaining is an interest free loan from work. But you should be able to get that at most places you wanted to buy one from anyway.

One More Solo · 13 Nov 2015 at 12:08

^If you are just getting an interest free loan then that is different, and I'm not sure the savings are much to write home about. TBH, based on the OPs explanation, that is more what this sounds like.

dowie said:
Yes I understand how paying for something pre-tax would work - I'm just not so sure how consumer electronics are justified? Sorry but you've still not explained anything with that post.

There are some rather obvious ways of exploiting this if you could just put all your spending through a company.

What do you mean by "justified"? It seems like you want a moral explanation rather than a practical one, I'm not sure HMRC are interested in the former.

My opinion would be if you are being paid in a non-cash benefit, it would be unfair to pay tax on it as you would have no cash to pay the tax. I guess that makes sense given you do have to pay tax on vouchers that can be exchanged for cash?

As for your point about selling your salary as vouchers every month on eBay, I think HMRC would expect you to pay tax as it would constitute a trade. Not declaring the income actually would be tax evasion.

dowie · 13 Nov 2015 at 12:11

One More Solo said:
What do you mean by "justified"? It seems like you want a moral explanation rather than a practical one, I'm not sure HMRC are interested in the former.

no - not moral - just an explanation thanks - I was hoping someone who knew what they were talking about would reply, while I'm all for discussion it doesn't seem that you're actually able to provide an explanation of how consumer electronics are tax free?

My opinion would be if you are being paid in a non-cash benefit, it would be unfair to pay tax on it as you would have no cash to pay the tax. I guess that makes sense given you do have to pay tax on vouchers that can be exchanged for cash?

no that doesn't make any sense - what makes sense is if there are certain things like child care and travel costs that get tax relief

As for your point about selling your salary as vouchers every month on eBay, I think HMRC would expect you to pay tax as it would constitute a trade. Not declaring the income actually would be tax evasion.

not really, you're allowed to sell things you own and no profit or capital gain is being made there

dowie · 13 Nov 2015 at 12:14

Greebo said:
Thats not what i'd call "salary sacrifice". Salary sacrifice is where the cost is taken off gross and the employee saves the tax and NI but this only applies to certain items and certainly not a PS4. Can be hugely beneficial for things like computers as savings are roughly 33%.

Of course a salary sacrifice scheme can be set up so a person can have a PS4 but the employee will still have to pay the tax and NI on the amount deducted. I hoep this is made clear to employees in the NHS buying PS4's?

In the Op's case on top of the £28 a month he will have approximately another £8 or £9 a month to pay to HMRc for the tax and NI.

The only thing you are gaining is an interest free loan from work. But you should be able to get that at most places you wanted to buy one from anyway.

OK this is seems more likely than the previous claims that a PS4 could be bought tax free

Greebo · 13 Nov 2015 at 12:14

It's pretty simple. There is a very short list of items which are NI and tax free under salary sacrifice.

Childcare vouchers
Additional employer pension contributions
Cycle to work schemes
Company cars
Work-related training
Car parking near your workplace

There is then a longer list which incur NI but are tax free.

Everything else like PS4 will be taxed and NI just like you had got paid the full amount of money on your wages and your employer will declare this on your P11D.

In general, salary sacrifice schemes are only beneficial for the employee for items which are at least tax exempt.

Everything else is just paying in instalments and sometimes if you are tied down to a supplier, it might not have been the cheapest place to purchase it from anyway.

dowie · 13 Nov 2015 at 12:21

Greebo said:
Everything else is just paying in instalments and sometimes if you are tied down to a supplier, it might not have been the cheapest place to purchase it from anyway.

sounds like a good way for curries to get lots of NHS customers...

thanks for providing an explanation - I was pretty skeptical of the PS4 tax free claims as frankly I've got quite a few colleagues who'd have likey hounded HR to set up a scheme if they could put through all all their spending like that - as it stands all we've got are childcare vouchers, a cycle scheme and season ticket loans... and the cycle scheme involves some convoluted system where you technically rent the bike initially

drumlegend · 13 Nov 2015 at 12:24

Look at benefits brochure and type in a hospital and you will see what I mean. It claims you save money