child tax credit calc issue

[alip76]

Hi- issue with letter from HMRC stating that they calculate my weekly childcare cost to be £18/week (!) when my actual is £129. I sent proof of my payment history from my nursery so not sure how they have arrived at this figure. I pay £234 per month (thru childcare vouchers, therefore legally avoiding paying tax & NI on this sum, and my ex husband also says £234 the same way) and I also pay an additional £20/month to top up to the actual monthly figure of approx £558/month.
My guess is that they believe the childcare vouchers to be 'free money' i obtain rather than paid for directly to the nursery by me from my salary, so have arrived at their £18/week figure due to this.
Can anyone offer any help as I am concerned my tax credit payments will be significantly reduced and i cannot speak to anyone til tomorrow morning- i'm not going to be able to sleep tonight as i'm so worried by the letter :-(

I thought you could only use the childcare vouchers or get childcare tax credits, not both?

This has a calculator so you can see which method is better to use.

You can't get tax credits to pay for childcare costs that you're paying for by salary sacrifice. It's one or the other. There's a calculator online somewhere which allows you to calculate whether you're better claiming tax credits or doing salary sacrifice.

Here it says you can only get tax credits for costs you incur yourself and this doesn't include paying by childcare vouchers. So I think only the amount you top up by is included.

They're right - that is the amount you can claim against.

I agree you can't get a 'tax' credit when you're not paying the 'tax' bit...

You either claim or you use the vouchers. You can't do both. They are right.

As everyone above says, the letter is correct.

You can sacrifice £234 per month each. That means you are sacrificing £468 per month between you.

You can then claim Tax Credits on any remaining childcare costs, if your income meets the threshold. That figure is £18 per week. They will pay up to 70% of the cost of childcare, so that would give you up to £12.60 towards the remaining £18.

However, you have to also bear in mind that by sacrificing the £468 per month, you are reducing your income for Tax Credits purposes. This means that your Tax Credit award will be up to £192 per month higher (for every £1 drop in income, you gain 41p), which is roughly £50 per week.

Your other option would be to claim it all through tax credits, but your income would have to be very low to benefit fully from that.

HMRC have a Better Off Calculator which you can use to compare the benefit of either using tax credits or childcare vouchers.

Thanks all for your help and explanations. I need to call HMRC asap to talk through their calculations with them. Thanks again for your help :-)

Have spoken to HMRC and the childcare vouchers appear the be the confusion. I think in my situation it will be more beneficial for me to opt out of this salary sacrifice. Wishing I'd been aware sooner, but at least all can now be resolved- hopefully ;-). Thanks for everyone's advice - very helpful :-)