Repayment of 30 free hours childcare and 20% top up

[Sparky2023]

Hi, I'm wondering if someone can help. In a bit of a panic. My salary is £125k and I have always contributed to my SIPP to make sure my net adjusted income is less than £100k. I have already submitted my self assessment tax return for 2022/2023. I have just been advised by my employer that I have received a benefit in kind (private medical insurance) which takes my net adjusted income for 2022/2023 to over £100k for this tax year. I have now amended my self assessment tax return and notified childcare services but am I going to be asked to pay back the 20% and 30 free hours as with 2 children this is going to amount to well over £10k and simply can't afford this... Any help or experience with a similar situation would be greatly appreciated.

Get proper advice, not from MN

You'll just get a load of posters asking why you can't afford 10k on a salary of 125k

when did you first get the work health insurance? Was it this tax year or last?

Usually if you owe the tax man they can change your tax code so you don't have to pay it all in one lump sum (in my experience)

How close to the line did you leave yourself that the benefit in kind value for private medical has tipped you over the upper earnings threshold? This would be lesson number one for future years, make sure you have leeway.

Alternatively you will get a whole load of posters asking why you can't afford proper advise on £125k a year.

I wouldn't trust MN for this. There are some knowledgeable and genuinely helpful posters but sometimes it's hard to work out who they are

I don’t use the hours but this happened to me - they rang me and said it was fine, I just couldn’t continue to claim for tax free childcare from that point on and I didn’t have to pay anything back. Maybe worth calling them?

You need to declare every 3 months or so that you earn under £100k in the HMRC site so next time you're asked, say you do earn over £100k. It was correct to your knowledge last time you declared and now you know differently. I can't imagine they'd backdate it - surely they'd just stop it from the point of the new declaration?

is the private medical definitely not taxed via your payslip? Mine shows on my payslip and is taxed.

Hi OP I’m in a similar situation and wondered if you did have to repay or what happened with your tax free childcare ?

Hi , HMRC Childcare Services have asked to write to them explaining the position, my letter was sent a few days ago and I await their response.

Im in a similar position where I am due to go over the £100k threshold in October 2024.
My son goes to school in September 2024 so I wont be using the childcare benefit when I go over the £100k.
If I use the childcare benefit until then and go over in October, will I be required to repay?

Isn't the eligibility worked out on your projected wage? So it sounds like you're quite a bit over the 100k a year if you're going to hit it in October? So no you won't be entitled as your monthly wage will imply you will hit 100k by the end of the tax year

Sorry, I should have explained...

I earn around £8,000 per month gross but have a one off loyalty bonus due in October that will be paid as a lump sum.

So when I reconfirm every 3 months, my pro-rata earnings will be below £100k. But then later in the year (and after Ive finished using the benefit as my son will then be in school) I'll be paid the bonus which will take me over

So I will qualify each time I update the code, but Im unsure whether HMRC will ask me to repay it when I go over in October

The rule is that you must not expect your taxable income to exceed £100k in the tax year, it's not just when you breach the limit.

So if you're already foreseeing now you will exceed it you shouldn't claim it, if you are seen to claim it and could have reasonably foreseen your salary being over £100k then there could be enforcement action.

If it's an unexpected bonus in March which took you over the limit then there would be more of an argument you couldn't have foreseen it and wouldn't have to repay.

There's some information here which may help

community.hmrc.gov.uk/customerforums/pt/275dbd06-5b4b-ee11-a81c-6045bd0ba09e#:~:text=Tax%2DFree%20Childcare%20(TFC),100%2C000%20in%20the%20tax%20year.

thanks

How much is the bonus? As you can put extra into your pension which will bring down your taxable income