Tax Free Childcare - losing eligibility over £100,000

[123456kent]

Hello,
My husband earns very near the £100,000 mark, and so in March we’d expect him to lose our eligibility for TFC and 30 Free Hours once he has a bonus/salary increase. Has anyone confirmed they are no longer eligible on the website? What happens? Do they take back any of their top ups? If we were to maximise on building up this account between now and then (to earn the maximum amount of top up) will it be stripped off us as soon as we say we are no longer eligible? Thanks

I’m interested to know this too.

Watching with interest too. For info a few months ago my confirmation was not accepted and I had to dispute it. I then got a letter saying they would reinstate my TFC because at the time I confirmed I “reasonably believed” I would earn under 100k. The way it’s structured to be forward looking over three month rolling periods makes me think that at the point in time during the tax year when you become ineligible then they just stop it and there is no look back (ie an adjustment through tax code or tax return to recoup) bit this is just a guess

For 30 hour funding, I think that you BOTH need to be earning over £100k each to lose your eligibility.

So parents earning almost 200k annually still get 30 hours free childcare? Complete madness.

I appreciate that childcare is expensive and when I had my children there was no government funded childcare but cannot accept that the taxpayer funds childcare at that level of salary.

i agree

Someone I know passed the 100k threshold for 30 hours with their (much larger than usual) end of January bonus. Their nursery had already claimed for the child for Jan-march but the parents told the nursery not to claim for apr-July (and then their child went to school in September). As far as I know, their claim was submitted for the first few terms believing they wouldn't hit the 100k mark (wages/hmrc would have confirmed this I presume) and nothing happened after. This was a while ago, when the scheme was fairly new.

They weren't claiming TFC as one parent was still claiming childcare vouchers for older children and you couldn't claim both at the same time.

The helpline for tfc and 30 hours may be able to answer this hypothetically?

As far as I know, only one parent needs to be earning over 100k, not both, to then become ineligible for 30hr & tfc

No that’s incorrect - if one parent earns over 100k you lose it

(Sorry to be clear, I agree with @Elbo7 - disagreeing with PP)

One parent needs to earn it, not both.

And I think you'll definitely be able to claim it until your DH's salary increases and until the next confirmation of your eligibility is due after that, which happens quarterly. At that point I believe you'd have to update the salary details (the questions related to them) on your Gov account and they would reassess your eligibility and let you know what happens next.

Its definitely just one parent that needs to earn over £100k.

Just put the overage amount into a pension and that will bring you back under.

yes, if both parents earn 99K,
£5,419 x 2 = £10838 take home per month, still can get 30 hours free childcare AND TFC.

and if just one parent earns over 100K,
£5,467 per month take home, they will lose 30 hours free childcare.

really unfair.

@plinkypots that is an option, for the bonus… if salary sacrifice is available for bonuses. But it’s not an option for salary increase is it?
yes it’s over £100k for one person, not both. Which is extremely frustrating.

I just called TFC helpline. She advised that there is a grace period once we confirm we aren’t eligible, and in that period we’d still earn it. But then after that the money you have received from govt as a top up ‘just disapears’
So, in answer to my original query, it would absolutely not be worth us building up the account to earn the maximum top up from them before it’s stripped from us.
i’m not 100% convinced that she was 100% convinced on the answer she was giving me…. It felt a bit like a fob off!

OP if he is likely to receive the bonus anyway then get him to increase his pension contributions by way of salary sacrifice, would this work? Work it out so that when he receives the bonus the total figure will remain under £100k pa if you can and job done, you will remain eligible to claim everything, you won't feel worse off and he will invest more into the pension.

But if the salary increase tips him over £100k anyway then that will be a futile move won’t it?
Also need to weigh up which has more benefit - taking the bonus and making overpayment on mortgage, or put the bonus into pension and keep the TFC/30 free hours…

There is a grace period. So what you have been told by the helpline seems right.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachmentdata/file/1027881/Earlyyyearsentitlements-operationallguidance33.pdf

Love the oven update!

If he will only just be over on salary then you can salary sacrifice into pension - either salary or bonus can be sacrificed and allow you to remain below the limit. Bear in mind the marginal rate of tax for anything between 100 and 125k is 60pc (because of the way the personal allowance tapers) so it's generally a sensible move.

He can chuck the extra in a pension and then it doesn't count towards the 100k threshold

You can put everything over £100k into a pension. The annual limit is £40k www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates

Or maybe accept that as high earners we should pay for our own childcare. I would be embarrassed to use a legal loophole when people are struggling to keep warm. Our taxes are needed for those earning much less.

@NewNovember in that case, you could donate to charity instead? That lowers your income (and you get tax back) but you get to choose the way your money is spent.

Politicians pit people against each other.
£100k is not rich in London. There is not much left after paying rent, bills and childcare. £2.5k rent, £0.5k bills, £2k nursery.

You should direct your anger at billionaires and tax-dodging multi-national like Amazon and Starbucks.

Using that logic, should higher earners be allowed an NHS GP? Or to send their children to state school?

What seems unfair to me is a system which results in some people contributing more in tax (due to their higher income) yet be prevented from benefiting from it (childcare).

There’s no tapering so as soon as you go over the threshold you lose your Tax Free Childcare and the 30 hours for 3 year olds (you only get 15). Those two things combined are worth about £5.5k for just one pre-schooler in nursery and so you can be in a situation whereby you’re paying proportionately more tax than anyone else as you lose your personal allowance and then are hit with losing your childcare funding. I’ve suggested my OH go part time which would result in him paying less tax (so less available to pay for others) and getting the childcare back. It shouldn’t have to be this way.