15 free hours childcare - sole trader - upper limit

[kt3101]

Hi,

I am a sole trader and looking to make over £100k this year which would mean I am not entitled to the free childcare hours. Does anyone know if I make a sizeable contribution to my pension to bring this under the threshold if that will work or income is assessed before pension contributions?

Thanks!

Childcare eligibility is based on profit (i.e. taxable income) when you’re a sole trader. I don’t know the specifics of how much pension you’d have to put away, but yes, you can pay extra pension (or make charity donations) to avoid going over the upper limit. There are lots of threads on here of employed people doing it, so it might be worth looking them up. For employed people I think it might work slightly differently if you salary sacrifice vs paying taxed money, so I’m not sure on the specifics for self-employed. (May be different depending on what type of pension you have?)

This is from HMRC

What adjusted net income is
Adjusted net income is total taxable income before any Personal Allowances and less certain tax reliefs, for example:
• trading losses
• donations made to charities through Gift Aid - take off the ‘grossed-up’ amount
• pension contributions paid gross (before tax relief)
• pension contributions where your pension provider has already given you tax relief at the basic rate - take off the ‘grossed-up’ amount

So it's the bottom bullet point, I'd speak to your pension provider if you're not sure.