30 hours and tax free childcare but potentially could earn over 100k by the end of the year

[Kmj2018]

Hi,

just wondering if anyone can give me advice on this. So I’ve reconfirmed our eligibility on tax free and 30hrs free childcare as nomal but this morning we had a phone call from hmrc asking for more details on my partners earnings. His job is made up of basic salary , bonuses and commission so it’s so hard to tell what he’ll earn end of the tax year but he has just told me he’s 90% sure he will go above 100k but told hmrc he wouldn’t hit 100k just in case that 10% chance he doesn’t . So my question is what happens if he does go above do we simply just have to pay it back or will there be other consequences like a penalty. We just want to do what’s right but not sure what that is. We definitely don’t want to be taking taking the biscuit!

I'm no expert on this but we have to reconfirm our details every 3 months and they check them what your earnings are etc through your NI contributions.
To add as well, it's based on your take home pay, so it could be worth him "overpaying" into his pension for example or finding ways to bring down his take home pay.

@user50316 Thanks for your advice. I will look into it

Hi, we are in a similar position. Have you applied yet? When you do, ask yourself “as of today is his taxable income £100k”. If the answer is no, then you are eligible and you need to reconfirm every 3 months, even if you predict he will go over later in the year. It’s not happened yet and essentially an assumption. Once his bonus / pay is reviewed (and he has started to receive it) and he is tipped over the limit, the next time you are asked to reconfirm you’ll need to say you’re not eligible.

and as someone else has said, it’s taxable income. If his gross income is £101k, but he’s paying 10% in to his pension then you’re fine. If he is considerably over, You could pay more into your pension / take out more benefits to get you below but then you need to consider if it’s worth it to save £300 or so a month

Just read your message again, if you confirm
youre eligible when you’re not then you’ll have to pay it back, and perhaps pay a fine.

if you reconfirm in good faith in the September, and he suddenly gets a pay rise which tips him over the edge in October, my understanding is you “get away with it” as you reconfirmed in good faith and they’ve probably allocated the £500 to you, then of course from the January you will need to confirm you are not eligible and the top ups will stop

We were in a similar situation last 2 years but DH’s bonus is announced in April and paid in June to allow planning for the tax year. He made sure he diverted enough into his pension so we remained under the £100k limit for TFC.

I was under the impression most companies pay bonuses towards the start of the financial year or am I mistaken?

@Nearlyamumoftwo I was under the impression you had to pay it back for the relevant financial year if you were no longer eligible but I could be mistaken too.

As far as I’m aware, there are no penalties unless you were deliberately dishonest on the reconfirmation

@Nearlyamumoftwo thanks that’s really helpful. No right now he has not gone over 100k so we told hmrc we are under 100k I’m not sure what happens if he does go over. My prediction is by January he will have gone over as he will have received his xmas bonus so does that mean we will have to pay back everything that was given to us from April 2023 or do they simply just stop the 30hrs and tax free?

Obviously when we do go over we will inform them immediately

So at this moment in time you have no idea if he’ll receive a bonus so you are confirming your eligibility in good faith. (yes sounds like you know it will happen but for simplicity, let’s say you have no idea). Once you’re asked to confirm your eligibility in January 2024 you will have to decline and you will not be entitled to tax free child care or 30 hours (because money he received in December tips you over the edge). You will not need to pay anything back, because when you were receiving your top ups, he was under £100k. How much over is he going? You could consider putting the surplus into a pension as a lump sum, but it’s a case of weighing up if you could “do without” that money until you’re in your 60s (but you will then get money off your childcare bill!). I think you can put in a max of £40k extra right now, but it’s due to increase soon - although not sure on that

@Nearlyamumoftwo thanks that explains everything 😊

This happened to us a few years ago, we started the year not thinking DH would earn over 100k, then part way through the year it became clear he would so the next time we reconfirmed I had to tick that we weren't eligible, we haven't had to pay it back and haven't had any follow up about it at all, I did wonder whether DH would have to declare it in his tax return the following year, in the same way you do if you claim and then pay back child benefit, but he didn't.

It isn't based on take home pay. It's based on gross pay, less any pre tax deductions. Of which pension would be one example.

I'm in a similar situation. Let's say my income after tax this tax year is over 100K, and my child starts nursery after the 5th April next year. Which tax year will the government use? This year, or the next year that my child starts nursery? I'm trying to work out when to sacrifice more into my pension to reduce my salary.

I am also in a very similar situation….
@JimmyN16, did you find out anything about your query? If that’s the case, would you share it please? Anyone knows?
Thanks

@Dicenunu hey there. So someone told me that it needs to be the previous tax year, but it sounds like you get assessed every 3 months from application. I plan on claiming for 30 hours from September 2025, so I plan on making sure that my salary does need exceed 100K between April 2025 and April 2026. What are your thoughts?

I have twice claimed Tax Free Childcare and later discovered that OH’s salary went over £100k. Each time he effectively had to repay the top up when completing his self assessment (he was asked to pay an amount equal to the amount of top up we had received - ordinarily he wouldn’t pay anything as entirely PAYE). So while I think the advice to claim until you know for sure you’re not eligible is correct (as you can’t backdate it) you should expect it to be clawed back at a later stage. Not sure about the 30 hours though as I’m unsure what monetary value they’ll place on that.

You will lose eligibility from the time you reconfirm and salary is too much there is a 3 month grace period to reconfirm.

@JimmyN16 I can't say for sure about the application but in our case, they contacted us around this time of year to review our account because we received our bonus payments May/June and it seemed our salary would going over £100k. I explained on the phone we will put x amount of income into pension to bring back under the limit and they were happy to allow for the benefit to continue.

What I am unsure about is whether the system would auto reject the entire application for you based on prev year salary as we were both earning under at the time we set up the accounts for children

I think you can up your pensions

@prescribingmum that's very useful information, thank you. Interesting.. our situation is oh so close. My gut tells me that they don't actually check and it's done on good faith, so as long my salary is under 100K for 25/26 it should be fine (in theory). Another question, can my partner and I claim for tax free childcare and then the 30 hours free care as long as one of our salaries under 100K?

Yes it should be fine, I just wonder if you need to do something else to confirm your salary won’t go above for the upcoming year if you were over the previous year? Maybe worth calling them to ask. The advisors are well aware of the pension diversion though and are absolutely fine about it.

The 30hrs and TFC are all in the same place so can apply for both simultaneously. When it’s approved, they give you a code for your childcare provider that they use to claim the hours

I thought I’d weigh in here with my situation.

I get a bonus which is paid at the end of March but isn’t communicated with us until mid February which is past the cut off to change pension contributions for February and only allows me to change it for March. I also cannot put any of my bonus into my pension as it’s not an option for my employer. I would take to take out a second pension.

My bonus can range from 15k to 50k and I have no idea until mid Feb what it’s going to be. So even though I can change my contributions to 100% for the month of March it would only be 100% of my basic salary (~6k).

Last year I’d paid handsomely into my pension to keep my ‘best case scenario’ bonus of 30k on the limit. However I got an unexpected 40k bonus and it took me over by 10k. I contacted them and explained my situation and having lost my eligibility for 3 months they then granted it back. I asked if I needed to pay back the 2k from the previous year but they said no.

I asked what happened if I went over again this year, would I then I have to pay it back and how would I do it. They told me that it’s unlikely that I’d have to pay it back because I had answered all the questions in good faith. They said that the compliance department could pick it up and request it be paid back but I absolutely wouldn’t be fined.

I have no idea how this will affect 30 hours going forwards though as these are due to start next April for DS1. I can only assume that again I will miss out for 3 months but then be able to claim after that?! I have no idea how I would pay that back as how would they calculate the 30 free hours value?!

If I took out a second pension and paid into that, HMRC wouldn’t have my adjusted figure until I completed my tax return which could be another 8-9 months after the tax year finishes…

No one seems to know the answer and every forum gives different answers.

No - if one person's net adjusted income is above £100,000 the entitlement is lost completely.

My DH's salary is well below the limit but I earn above it. I have been ploughing money into my pension to keep me below the £100,000 limit. It's painful at the time, especially as I am self-employed so can never be sure of what my income will be in the future, but doing the mathematics it was clear that the money saved by retaining the childcare allowances made the net cost of 'losing' that pension money negligible.

Hi, I'm wondering if someone can help. In a bit of a panic. My salary is £125k and I have always contributed to my SIPP to make sure my net adjusted income is less than £100k. I have already submitted my self assessment tax return for 2022/2023. I have just been advised by my employer that I have received a benefit in kind (private medical insurance) which takes my net adjusted income for 2022/2023 to over £100k for this tax year. I have now amended my self assessment tax return and notified childcare services but am I going to be asked to pay back the 20% and 30 free hours as with 2 children this is going to amount to well over £10k and simply can't afford this... Any help or experience with a similar situation would be greatly appreciated.

In some circumstances there is a term's grace period (for example if you lose your job) but I'm not sure if a scenario where you start earning more than £100k counts. Worth googling grace period. I found my local council were reasonably helpful in clarifying the position when my partner was made redundant.

But if there is no grace period, as others have said, you could make additional pension contributions to keep total income below £100k for the relevant year.