For most individuals, the scheme will not impact child benefit payments. However, if you earn more than £50,000 and currently pay a tax charge in relation to child benefit, participating in the scheme could reduce or remove this charge. This is because your amended salary will be lower once you participate in the scheme.
Your entitlement to tax credits may be affected by participating in the scheme. When calculating tax credits, HMRC will consider your revised salary, but also the value of the BiK you have received. If you participate in the scheme, your income for tax credit calculations will reduce, and your entitlement to tax credits may increase.
If you currently receive tax credits, and your annual income reduces by £2,500 or more by joining the scheme, we recommend that you immediately report the income reduction to HMRC, as this may trigger a change to universal credit. For more information, see here.
It is also possible that your entitlement to universal credit may increase, because your salary will effectively have reduced. For more information, see here.