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!

Yep @ruby1957 so they can work more, advance in their careers, earn more, and therefore pay more tax than most people earn. That tax is needed to fund benefits for everyone else. It’s crazy to disincentivise people from working and earning more.

Absolutely this.

Yes a household potential of 199k but also potentially 101k in central London. It’s all relative.

Thanks guys. I have worked since the age of 15 from working part-time in a restaurant to now working a decent job in the city. Ruby is a bit confused as to who the enemy is here.

My partner and I live in a 2 bed flat in London, whilst supporting a 6 month old baby. A few months away from having to pay over £2000 a month for childcare 5 days a week! Our household income is high but like @InhaleExhale10 says, it doesn't get you very far these days.

Blame the system, not me!

Childcare is a cost to work. It should be tax-free, period. As it is, the tax-free childcare scheme provides a very low level of subsidy - anyone earning over 100k will still be paying 20-40% tax on the income used to pay for childcare. In addition, the cliff edge at 100k is an outrage. This policy should be rethought but since it primarily affects women in work clearly it's not a priority (and I mean this whether it is the father or mother on 100k+)

I agree. Workers should be able to offset the cost of childcare against their earnings to reduce the tax they pay. I'd extend that to include commuting costs for public transport too as for lots of people, train/bus fares are essential for them to get to/from their workplaces.

@Kmj2018 would you be able to share the outcome of your situation here at ll? I am in a very similar situation, where we have received the notice to reconfirm our eligibility this week, for the 30 hours free childcare, for the next 3 months. As of Pay Period 11 i.e. end of Feb 2024, I won't have gone over the £100k threshold but almost certainly will with Pay Period 12 i.e. end of March 2024. My salary is based on basic + commission. It's likely I will only go over by 1 or 2k. I don't have the option to increase pension payments via my employer, but do have a separate private pension that I will happily pay into to bring it down to <£100k, but I'm not sure how this works as would only be officially recognized by HMRC when I do my tax return the following year.

I'm leaning towards confirming that we are still eligible as of today as I haven't gone over the £100k yet, and making the pension payments to reduce down to below £100k, so at least can show I've acted in good faith.

But at the same time I'm weary of getting into trouble with the HMRC and if they could say I've made a false declaration and any penalties etc. associated with that.

The other option is to say we are no longer eligible and just pay the full hours for the next month or so, as we are at end of tax year, but then could they ask me to pay back all the funding from the year that I've already had.

any suggestions, advice etc. greatly appreciated

@echobelly79 you’d be best to reconfirm now for the next three months. In that time when you go over, put a payment in your private pension and do your tax return.

When the next confirmation comes around HMRC will see that your tax return bought you back under.

In the event of ‘one off’ going over the £100k, do they ever claw back the money?
And if so, are we talking ‘just’ the 20% tax free or the 30 free hours, too?

I may (or may not!) get a bonus next month that pushes me over… child due to start school in Sept so just seems ridiculous to be messing around with pensions when if I were to get a bonus in April, it’d be a non-issue.

With this scenario, my tax return for 23/24 wouldn’t be submitted until Jan 25.
I’m due to reconfirm in May and in that tax year I’ll be on track for under £100k again.

This is all very confusing.

If you go over in the tax year 23/24 and you don’t submit a self assessment to show that you’ve made accommodations that allow you stay under before your next reconfirmation you will lose your eligibility for the whole year.

Why can’t you submit your self assessment before January?

To be fair, I can do and will have to in this scenario.
If you lose eligibility for the whole year, what has to be repaid? The 20% tax free or the 30 free hours on top as well?
Not sure how it’s all calculated.

They give mixed messages, I have been told previously that they won’t claw the money back and also told that their compliance department could claw back both the 2000 and the 30 hours at the local council funding rate. It’s hard to know what to believe!

Hey There

i'm at the other end of this and forgot to confirm my earnings and had to go via mandatory review which they said I haven't earnt enough 23/24 and so the halted my eligibility for the 15 hours top up from the government but allowed me to continue with me TFC. However, whilst involved in the mandatory review I was able to reconfirm my childcare eligibility code via the portal on the HMRC. So the council i am in have said my eligibility for the full 30 hours is available until 9 June with a grace period until the 31-December 2024. My LO starts school in September so I'm confused to when I will have to pay back the money owed from my mandatory review decision... and why the code is working with the council but HMRC childcare are saying I'm not allowed to use it... and what this grace period is about?!

I made the mistake of believing earnings were off gross pay and not net, however, this financial year I'll be earning a lot more as I've taken on a lot more work since end of March.

Also in all this too, do I have to earn the full amount needed to claim the hours despite only needing them until September?

thabks

I can’t help much with self employed however I’m surprised it’s off net instead of gross, that really doesn’t sound right.

You won’t need to pay anything back so don’t stress about that.

If your council have given you a code then use it. A grace period means that if you fall out of eligibility mid term then your grace period means you are entitled to the benefits until the end of that term. Yours would usually be Sep so unsure why it’s December but use the code you’ve been given and get the free hours before she starts school!

When you say net, do you mean net profit (ie turnover - expenses) or net income after tax?

Turnover - expenses