Want to claim 30h free childcare but confused about 'adjusted net income'

[Sandrine1982]

Hello.

Can someone please help? I would like to apply for 30h free childcare for my DS but I'm totally confused about the 'adjusted net income' thing.
In my mind, the net income has always been the "take home" income one receives after all the tax has been taken off. But this doesn't seem to be the case?

Can someone please help me work out the adjusted net income based on the following info?

• Gross annual salary - £130,000
• Annual income from BTL property - £13,000
• Pension part on the payslip - £38,000 (annual)
• Tax to pay in this financial year is about £39,000

Thank you in advance.
xx

You can't claim if you earn over £100k per year.

*as a basic salary.

It means the income you pay tax on.

This page explains it and is linked from the .gov 30 hours page. Based on this your adjusted net income is £105,000 so you're not eligible.

www.gov.uk/guidance/adjusted-net-income

130,000 + 13,000 - 38,000 = 105,000

Tax paid isn't relevant for this calculation.

Based on this your adjusted net income is £105,000 so you're not eligible

Adjusted net income in this case means income pre income tax, but after some allowances. Income tax paid is irrelevant.

You can deduct pension contributions paid gross, before tax relief. So assuming those you quote are, then You are unlikely to qualify as your calc seems to be

130+13- 38 = £105k, so over the limit.

If fees are, say £7.50 per hour, that's £8775 per year for 39 weeks per year at 30 hours per week. You'd be better off increasing your pension contributions to bring you under the limit.

maximum Pension contributions are £40k so not enough
you can give to charity to reduce your taxable income

You’ll only get the 15 funded (not free! Though may be some places) hours.
Its a stupid system and tough tits
I don’t think there should be an upper limit at all

Increase pension contributions if you have unused annual allowance brought forward, make gift aid contributions, see if you can do a salary sacrifice arrangement for a company benefit like a car.

Thanks everyone.

How do we know if the pension input is gross or net?

Surely that's irrelevant whether it's gross or net?

I found this online calculator where if I change the pension to "gross" - it will put us below 100K.

www.rossmartin.co.uk/private-client-a-estate-planning/income-losses-claims-reliefs/1448-adjusted-net-income

-As a hypothetical, if we sell the BTL property (planning to do that as we're losing money on it anyway), will we qualify for the 30h free childcare?
Or will the profit be added to the adjusted net income for that year?
We'll be paying capital gains on the profit that so I thought not?

The pension being paid gross or net is relevant because the guidance states you can deduct gross pension payments.

Are the £38,000 contributions made before or after tax?

Before tax I think... so gross?

You may be able to contribute more to a pension from April. Wait for the budget next week.

Cheers. Just found out that the pension contributions from the employer can't be deducted. So we definitely don't qualify ..

Good

Good

🤔🤔🤔🙄🤷🏻‍♀️

yes only your contributions can be deducted, not your employers too.

OP employer contributions are irrelevant, it is whether your gross taxable income after taking off pension deductions is under £100k.

How much of the pension contribution is from your employer?

You can put £40k per annum into your pension and if you haven't fully used this allowance in the two previous tax years you can roll forward the remaining allowance, so you may be able to pay more into your pension to come under the eligibility threshold.

Unlikely. If anything they seem to be wanting to stitch people up by messing with pension rules again by trying to raise the age people can withdraw their own money, still not uprating the LTA for inflation and other nonsense to discourage saving. Some utter morons were even advocating reducing tax relief on pension saving! As though we need more people solely reliant on the state pension in future. We are nation led by imbeciles unfortunately

Hey, piggy backing on this thread for a related query - what about bonuses? I understand some get a guaranteed bonus which should be included but what if there's is a discretionary bonus that isn't guaranteed and could be any amount?

When I spoke with HMRC I was told 2 separate things - one person said it's not guaranteed so shouldn't be included but another said I'd have to pay the tax relief back potentially.

Wondering if anybody else has had this situation and what happened?

Bonuses (discretionary or otherwise) are included as part of your taxable income in the same way as salary. If that tips you over £100k then you are no longer eligible.

So I spoke with HMRC and they suggested it wouldn't count until you receive it because it's unexpected. Once you receive it, you are no longer eligible. I'll check again, third time is the charm.