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The Salary Sacrifice Tax Credits Legal Scam

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I've no moral objection to people using this- it's there

Anyone got any experience of this?

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If it's available to you, and it's not to me, you pay down large amounts of your monthly salary via salary sacrifice into a pension scheme. This counts as a lower salary. Now are technically and legally on a low income so claim tax credits. You end up with a not excessively lower disposable income, but with spectacularly high pension contributions largely for free, massively tax payer subsidised.

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My mistake. I think any pension contributions can'improve' your tax credits status like that

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Bit of an oversight if that's true...

Not many people seem to exploit it, that's what's strange...

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Or you can become self employed, cherry pick your work and keep the hours low. Claim WTC. Have time to spend with your kids, do jobs around the house that you'd otherwise pay someone to do.

But not UC.

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I've no moral objection to people using this- it's there

Anyone got any experience of this?

Tax avoidance is legal, Tax evasion is not. You're a fool if you don't avoid as much as is possible for your given circumstances. If the government/law makers don't like it they can always change the rules.

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Tax avoidance is legal, Tax evasion is not. You're a fool if you don't avoid as much as is possible for your given circumstances. If the government/law makers don't like it they can always change the rules.

Agreed

Some left wingers like to criticise legal tax evasion before doing it themselves, at least right wingers are honest about it

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Agreed

Some left wingers like to criticise legal tax evasion before doing it themselves, at least right wingers are honest about it

Some accountants for instance, move sections of their income over to the following year to gain maximum tax credits and even out their earnings. They manipulate their incomes accordingly. I do not understand the details to be honest but that seems to be what my accountant tells me. I think it is a way to claim tax credits even in years when their earnings go up, which would have cancelled their claim for that year, by carrying some forward to the following years.

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Some accountants for instance, move sections of their income over to the following year to gain maximum tax credits and even out their earnings. They manipulate their incomes accordingly. I do not understand the details to be honest but that seems to be what my accountant tells me. I think it is a way to claim tax credits even in years when their earnings go up, which would have cancelled their claim for that year, by carrying some forward to the following years.

This sort of thing has been going on in one form or another for decades. Back in the 1970s many self employed parents of University students would defer earnings until the next tax year so their children would qualify for the means tested grant ( yes kids contrary to popular belief not all students got grants back then). I am bloody sure that there have been people in that position gaming Tax Credits in the same way.

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The Child Support Agency was the same.When i did a bit for citizens advice i had a few people (men) who were being left with nothing and massive payments to the CSA.I advised them to make voluntary payments into their pensions for 12 weeks and leave themselves £50 a week.CSA then access on £50 a week,payments = 0.Then cancel extra pension payments.Two years later when CSA come back repeat.

It wasnt for me to decide the rights and wrongs of the situation.Most then managed to get their ex partners to agree reasonable paymants outside of the CSA once they saw they were getting ziltch.

Tax credits are even easier.You simply pay everything over £130 a week into the pension to get fulltax credits and no means testing.With the new rules you can even access all the free money at 55.

The funny thing is though very few use this as very few understand it.

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Just filled in an online wtc calculator....: based on a couple with one child working..one of them working 24 hours and the other 8 hours...... earning £10k ..total paid to them in WTC and CTC would be £6,604 per year...bringing total income to £320 per week, or £16,603 per annum.

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The Child Support Agency was the same.When i did a bit for citizens advice i had a few people (men) who were being left with nothing and massive payments to the CSA.I advised them to make voluntary payments into their pensions for 12 weeks and leave themselves £50 a week.CSA then access on £50 a week,payments = 0.Then cancel extra pension payments.Two years later when CSA come back repeat.

It wasnt for me to decide the rights and wrongs of the situation.Most then managed to get their ex partners to agree reasonable paymants outside of the CSA once they saw they were getting ziltch.

Tax credits are even easier.You simply pay everything over £130 a week into the pension to get fulltax credits and no means testing.With the new rules you can even access all the free money at 55.

The funny thing is though very few use this as very few understand it.

Am I right that tax credits discount pension payments against your salary, but housing benefits don't?

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If it's available to you, and it's not to me, you pay down large amounts of your monthly salary via salary sacrifice into a pension scheme. This counts as a lower salary. Now are technically and legally on a low income so claim tax credits. You end up with a not excessively lower disposable income, but with spectacularly high pension contributions largely for free, massively tax payer subsidised.

Do you have some figures to share? It's just I find it hard to believe it is worth gambling that you will ever see a large chunk of what you earned ever again.

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Or you can become self employed, cherry pick your work and keep the hours low. Claim WTC. Have time to spend with your kids, do jobs around the house that you'd otherwise pay someone to do.

This issue is highlighted on the universal credit thread. I doubt that the majority of claimants having anything worth being self employed in and therefore this is not a long term strategy for when the credits eventually dry up.

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Do you have some figures to share? It's just I find it hard to believe it is worth gambling that you will ever see a large chunk of what you earned ever again.

You don't need to gamble anything. Put it in a SIPP and you can control what happens with the money.

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You don't need to gamble anything. Put it in a SIPP and you can control what happens with the money.

That's my point.

The financial system isn't broken, house prices will rises forever and that money you put into a tax efficient wrapper will be all yours in 25-30 years.

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That's my point.

The financial system isn't broken, house prices will rises forever and that money you put into a tax efficient wrapper will be all yours in 25-30 years.

If that's your perspective then you should spend everything you earn and borrow as much more as you can get. No need to think twice.

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Am I right that tax credits discount pension payments against your salary, but housing benefits don't?

Im not sure as everyone i knew who did it had a mortgage,none were getting HB or any other means tested benefit,but id think HB would count it,but not 100% certain.

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Im not sure as everyone i knew who did it had a mortgage,none were getting HB or any other means tested benefit,but id think HB would count it,but not 100% certain.

My suspicion is that salary sacrifice permits you to claim housing benefits if you sacrifice down to a low income, but basic pension contributions don't. Of course paying a fortune for a house in this market doesn't justify it. If somehow you had a medium to small mortgage which in this low ir climate gives you low monthly outgoings then it could work spectacularly well. But if renting then that could severely undermine this trick, as your income may technically increase under HB rules of just paying pension contributions, therefore reducing your income from HB. It's complicated. Salary sacrifice solves that of course but that's not available to most of us.

Another support for house ownership.

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