Salary above threshold for Government support with childcare

[DJBebe]

Hi all. I am struggling to understand if I can afford to accept a pay rise.
Salary 95k, potential bonus 10k (not guaranteed), 2 children (3 and 1 years old).

Am i entitled to receive support with nursery fees: the 30hrs and 20% top up?

How does it work? If i get the bonus (not able to pay it into my pension) in March or April how will it affect my eligibility?

Can you give as a link to the rules that create this conundrum ?

Can you pay:£6k of your normal wages in to a pension?

Hi, does your husband work? From my understanding it’s based on household income, so if your partner earns any money it will put you over the £100K threshold anyway.
if you’re over the £100k household threshold you aren’t entitled for the free 30 hours. We don’t get them because of this, but once they turn 3 every child is entitled to 15 hours regardless of income.

It's not, it's individual income.

"If you or your partner have an expected ‘adjusted net incomee_’ over £100,000 in the current tax year, you will not be eligible."

www.gov.uk/30-hours-free-childcare

Over 100k you lose the 30 hours but do get the 15. You also lose the tax free childcare ie the 20% top up. You’re right to calculate whether it’s worth the extra income!!

You should be fine, I assume you pay into a pension, and that would take your yearly pay down to below £100k?

My salary is 95k, but the potential bonus (the bonus is not guaranteed, it will depend of the company's profit if any) may take me above 100k. What would happen in that situation? Will i loose the entitlement for the following year as well because if this year's bonus?

If it's a £10k bonus that takes you to £105k, do you pay more than £5k into a pension? That would take you back down to below £100k and you won't lose the entitlement

How much of the 95k do you pay into you pension and do you have any other taxable benefits eg car/car allowance/healthcare ?

If/when your bonus is announced you should be able to choose to pay some if it into your pension to keep you under £100k

I don't think I can pay the bonus into the pension pot.
Will I loose the childcare support for 3 months only or just forever due to the current year bonus?

Do you not pay any of the £95k into a pension? Or is that £95k already taking pension contributions into account?

@DJBebe its really impossible to help without answers to the questions above about existing pension contributions and other taxable benefits

Please answer the pension question. If you pay for than 5k into your pension you don’t have a problem.

the figure used is adjusted net income not gross income

Give them a call. They are really helpful.

I had a similar situation so basically claimed it as guaranteed salary was <100k. Bonus then came along which took total over 100k and pretty much immediately got an email to say not eligible for the following year.

Called them, explained that for the coming year salary was still <100k and bonus wasn't guaranteed and they reinstated it.

If your pension is salary sacrifice you can increase the contributions by the amount of your pay increase - you can pay a max of £60k per year into your pension. It’s much better in your pension than not getting it at all. You could also consider other salary sacrifice benefits. I pay for extra life insurance via salary sacrifice.

Thank you.
I pay 5% into my pension and employer tops up , does mean that my net income is now 90,250 rather than 95k?

And if I had a bonus of 10k, as my net income is down to 90,250 , i could take up to 9,740 cash and still be under 100k threshold?

You could take the full £10k and just pay an additional amount into your pension to bring your pay below £100k.

You don’t have to make all your pension payments via your employer. You can pay into your pension directly

You could just increase your pension contributions to 6% as long as you have no other taxable benefits then even the full £10k would keep you under the threshold

Yes, essentially, because it's adjusted net income not gross income. Your pension payments are taken off before tax (and taxed later when you claim retirement benefits).

Similar position here but we salary sacrifice into pensions to stay below the threshold 👌

It might be worth talking to a financial advisor about this, that’s what I’m planning to do to establish the best thing to do with similar earnings to yours.
It has always struck me as very weird that it’s not based on household income which would seem fairer.

absolutely, very frustrating! You could have 2 people in a couple earning 99k each adjusted net income and still be eligible, but a single parent earning 101k and not eligible 🤔

We have this issue too . ensure you keep your regular income under 90k by paying more than 5k into a pension and you should be ok. maybe put in £6k to be sure. it's also a good opportunity to build up your pension a bit. my husband spoke to his HR about this and they said they do it all the time so they're used to it.

Your firm probably won't match any higher but you can always add your own contributions in. Your HR and payroll should know what to do.

Also it wouldn't be for that three month period but the whole financial year it would be effected

Don't forget it's not just your job, to my understanding it's taxable income which includes things like interest on savings.

As far as I understand it, when the new changes come in on childcare you will lose access to all childcare help. This is 30 hours (instead of still getting 15 at 3 years old) for both children, plus tax free childcare.

Again, get a professional to check but if you can't put the bonus into pensions and possibly salary sacrifice some more (I'm not sure salary sacrifice is the right words, but reduce taxable pay) you could lose in the region of £35k worth of your pre tax wage made up of 2 sets of 30hrs paid post 40% tax and 2 sets tax free childcare.

Def pay into pension - either employer scheme if you can or a personal pension.

And on £100k you really should put more into pension than 5% if you can