Tax free 20% net or gross?

[Yabbadubba]

Hi all.

please no roasting, but I’d like to understand more about tax free childcare. I know that you both individually need to be earning under £100k, but is that gross or net? I would have assumed gross, but I don’t find gov.uk clear and two people on the hotline said different things! Friends say different things too. DH earns literally a few pounds over, so keen to know. Also I hear you can increase your pension contributions too to get under £100k, is that correct? Could some one please advise?

I appreciate we are fortunate, but we do have a lot of other things going on - we’re currently worse off with his salary so keen to hear replies. This is for tax free childcare (child under 3) thanks

Your husband is earning over £100,000 and you'd be better off without his salary. How?

Yeah, there is no way that his income is making you worse off.

If he was earning a few £ less, we would get back £200 a month through tax free childcare

@ancientgran sort of - if he was earning a few £ less we would then get hundreds back through childcare schemes. With me earning nothing and being the main provider for a lot of extended family it helps

I had heard similar to you that it was net and people increase pension contributions to get it under.

It is taxable income OP. So neither gross nor net. Me and my DP earn a little over 100k each. We both manage our pension contributions so that we never cross the 100k threshold. This way we get both the tax free element and the 30 hours now one of the children is over 3.

Gov UK site is pretty clear actually - the relevant income measure is “adjusted net income”: www.gov.uk/tax-free-childcare

Adjusted net income is defined here to be post pension contributions (but not post income tax etc, which is what I would assume you meant by “net”): www.gov.uk/guidance/adjusted-net-income

The £100k is gross and based on taxable income so would be after any pension contributions so you can increase pensions contributions to get below the £100k if you aren't too much over it. This is also probably worth doing as for everything you earn between £100-£120k you pay a marginal tax rate of 60% because for every £2 you earn you lose £1 of your tax free allowance.
You can see clearly on this link it is based on taxable income which is after pension contributions, if that helps.

www.gov.uk/guidance/adjusted-net-income

Does DH have a salary sacrifice pension scheme at work? If so, more towards that would lower his "adjusted net income".

With tax free childcare you do not get money back - you pay less.
So if your childcare cost was £10,000 per year, you would pay £8,000 and the topup adds £2,000. Maximum topup is £500, per 3 month period, per eligible child.

thanks for your reply!