Gov Tax-Free childcare topup - higher salary question

[StationeryNerd]

Hello, does anyone know if the eligibility for the Gov top-up on childcare is based on your salary once pension contributions are taken out?
My DH has a new job offer. The starting salary is £110k gross. But he can put so much into a pension or salary sacrifice meaning that he will go under the Government £100k limit. His take home will be £90k: does this mean we can still claim the top-up? Thanks

It’s net, but morally it’s not a great thing to do. There is a good reason the threshold is set where it is.

Don't have an answer to your question because I don't know what the threshold is but honestly.. you've clearly got waaay more than the living wage coming in, is it necessary? I am a single parent earning £32k a year and welcome any help but with the money you're on I wouldn't insult others who actually need it.

If it was morally fair it would be based on family income and not be a cliff edge benefit.

Utterly ridiculous answer.

Theres no moral issue with arranging your tax affairs to access childcare support.

At £110k the family may actually lose money vs his earning under £100k, such is the size of the loss.

Everyone earning between £100-160k does this, if they’re able to get their earnings under £100k.

At £110k the OP might lose money vs earning £99k due to cliff edge removal of these benefits plus a 60%+ tax rate.

The loss of tax free childcare and free hours might be worth ~£10k now. To earn that above £100k you need to earn about £25k.

It is not uncommon for a childcare place to cost £2k+ a month, more.

I know many people paying £4-5k a month to put two in nursery to allow them to work. £100k after tax and student loan is less than £5k a month.

Ignore this, pointless statement. If you're entitled, do it.

It's your adjusted net income (otherwise known as total taxable income), so it's your gross minus pension payments but before tax/NI.

To answer your question, yes it is from the gross salary after pension is taken and the overwhelming majority earning just over £100k put more into pension for this reason.

Once you factor in the higher tax rate from 100-120k, you end up losing money by missing out on both free hours and TFC.

As a PP said, the morally fair thing would be for this benefit to be based on household income or a universal benefit.

Yes I'm not getting drawn into a question on morals esp as some people don't understand the scheme or economics. Would appreciate only practical answers so this very reasonable question about our family finances can get instructive answers and not derailed.

Is anyone able to state whether the pension contributions would allow us to claim? And if so, what proof do HMRC need if you haven't started the job yet? Can't get through on the helpline! Thanks so much

Yes you can do that, sometimes they’ll want you to call when checking eligibility if you’re on the cusp but you just tell them it’s net adjusted and they’ll approve it

They don’t need any proof - you just tell them you don’t expect to earn over the threshold that year.

And make sure you put enough in your pension to stay below the £100k limit.

Yes, you can claim if pension contributions take you under the threshold. If the job hasn't started yet there are some time limits (you can only apply so far in advance - I think it's 31 days). If you go to the tax-free childcare site on gov.uk there us an online application form that takes you through everything.

This makes good financial sense for anyone to do. You don’t need to prove anything as yet. Apply, tick you’re both earning under £100k and you need to confirm every 3m. Just make sure that you haven’t exceeded the £100k limit and that’s all you need to do. I have never had to show any proof of my income to HMRC. It’s very simple to do. I recommend a direct debit to your childcare account to make it easier as a couple of time I forgot to put money in and lost out.

You sign up on government website, not via HMRC. You need to declare that you are both earning above the min requirement and if projected income is over £100k for the tax year after pension is removed. If they are unsure based on the information they have, they will give you a call to confirm.

IME we have never had to supply anything to prove our status, they take our word for it but ofc are able to check everything as we provide NI numbers

Dragonfly I wonder if you would say that to those in Scandinavian countries where access to childcare is for all and everyone lauds them as a eutopia. Is it just high earning Brit’s you have an issue with accessing childcare?

So many chips on shoulders on this thread!

Don't be silly. Putting at least £10k into your pension when your salary is £110k is just sensible and is what I'd do even if childcare wasn't a factor. I wouldn't reduce my pension contributions just to make sure I don't get free childcare!

And if I was entitled to free childcare, I'd claim it.

One thing you also need to consider is the value of any taxable benefits eg health insurance or something. Those will need to be added back to his salary, and could make a difference if the pension contributions take his salary to only just below £100k.

A single parent earning just over £100k in London takes home £5k per month after deductions but childcare for two costs £4.4k without TFC/free hours leaving them £600 to pay mortgage, bills and feed their children. They receive no UC or other state support like you do.

This was the reality for a close friend who lost their DH to cancer. Reducing her salary to under £100k to get the funding was damn well the best decision for the family.

You should be hating the system not the individuals

Why is OP's family claiming what they are entitled to an "insult" to poorer households?

Their claim does not reduce the availability of assistance for other eligible claimants (most of whom get other benefits as well, like child benefit which OP's family will not be eligible for).

It's also only a 20% top-up (and capped at £500 top-up per quarter). Because the amounts will have been paid into the tax-free childcare account from take-jome pay, higher rate taxpayers will also still have paid 20% tax on those amounts, plus 40% on the balance above the top-up threshold.

The race to the bottom approach on MN when anyone dares to gave a decent salary is so tedious!

Sorry I should say as per the above comment I am not upset with individuals, it's definitely a poorly thought out system especially as someone who does get back from the government.

I'm not versed in the tax affairs of high earners (obviously) so I'll take back my comment however if this particular individual also earns atop their husbands salary I would still feel a bit sour about it.

Basically we are all f*cked. The end

Instead of feeling sour about other people's success, remember that the (max) £2k they get back whilst paying childcare fees will be offset many times over by their overall tax contribution. Your anger should be directed at wages being too low for many people, requiring them to claim in-work benefits - not on relatively higher earners whose taxes support the welfare state.

@prescribingmum Ok thanks so much. Sorry to ask a follow-up, but if he hasn't started the job yet and only has an offer letter as proof of working, any ideas that his gross after contributions will be under threshold?

Thanks, I didn't think of that

If the job start is imminent then for this tax year you will be under the 100k threshold anyway as there are only 3months to go. By April you would have arranged your affairs to claim for next tax year.