Gone over 100k, what does this mean for tax free childcare?

[UmberFatball]

Morning mumsnetters
My DH has ended up getting a bonus that will take us over the 100k threshold for the year. We considered putting more into pension but actually we've had lots of building work this year and could do with the bonus to rebuild some savings!
What does this mean for tax free childcare now? Next time I need to do the declaration I'll inform them that his earnings have gone over 100k so I assume I won't be able to use it from then?
In this financial year my youngest changed from nursery (where he was getting 30 free hours) to school. How will we have to pay this back? I know he would have been entitled to 15 hours so will they calculate the difference?
We've also used TFC to pay for after school clubs so will we have to pay this back for the whole financial year?
Anyone who's been in this situation and could advise please?

How much over the 100k is he with the bonus?

When will it be paid, can he salary sacrifice it?

Otherwise, I would definitely put a lump into pension to keep earnings under the 100. It's such good value plus you don't lose childcare funding

Are you aware of what makes up your “Adjusted net income”? As PP mentioned, the biggest potential lever to bring you below £100k is your pension, but any gift aid donations can also be deducted.

if you are still over and don’t want to put more in a pension, it comes down to, were your prior declarations in the year reasonable. If they were, the n no payback required I think. Useful link here…

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

As PP says, it depends whether your previous declarations were reasonable.

Eg if your DH's adjusted net income was £99k and you knew he was going to get a £50k bonus, you shouldn't have previously declared yourself eligible. So you may have to repay.
If his adjusted net income was £90k and he got an £11k bonus which was a surprise, that's fine.

He should pay the bonus into his pension.
If he stupidly allowed himself to receive it he can do it via a SIPP takes 15 mins to open one with aj bell or similar.

If he doesn't want to you dont have to repay what you already received

Thanks all, it's more like the scenario of pay went up to 95k during the tax year and a 15k bonus, we've already put lots into pension and he'll definitely be over as gets a car allowance too. Problem is we do really need the money now rather than in our 60s! Big loans/mortgage/house renovations etc. I will read the link above and try to work out if we'll have to pay back thank you
I think I next need to declare on the portal in the next week so just trying to pre-empt what comes next

I suppose the question would be, at the point his salary went to £95k, did you know there'd be a >£5k bonus that you wouldn't put into pension. If so, technically you shouldn't have declared at that point.

To be honest I don't know how they'd prove that unless the bonus is a regular yearly thing that is pretty predictable and reliable? Rather than one that fluctuates quite a bit and has never been as big before.

Over £100k he will also lose his personal allowance at a rate of £1 for every £2 earned

That marginal band is taxed at 62% so I would do your sums carefully as you may be better off putting lots more into a pension

He does 8% pension which is the max his employer matches already. At what point does it make it worth it to actually earn over 100k and not need to put everything over it into pensions? Feels crazy to be working hard now but not get any benefit of it!
The bonus is not a given and he hasn't had one this big before, so when I previously declared I didn't expect to be over 100k, I will now obviously change my declaration. I'm not so worried about losing the 20% top up it's more the 30 hours free childcare we had from april-august?

Aside from keeping your tax free childcare, you also get very good tax relief. I believe it’s something like 60% on the portion 100-125k because of the nuance of how tax bands fall.

(I don’t know the exact number but it’s more than 40% and is the portion of your salary where you get the most tax relief from pension contributions)

It could be well worth paying a tax accountant for their advice. For the sake of probably no more than £200 they will be able to give you all the info you need based on your exact circumstances.

This happened to me last year unexpectedly- similar to your situation. I read around forums and the consensus was that if it was unexpected, they don’t come to you to claw back the already used funding in the year, albeit you do lose the benefit entirely on a go-forward basis. Good job it happened for you now that your kids are in school since at least 20% on the clubs isn’t as noticeable as 30 hours of nursery!

At what point does it make it worth it to actually earn over 100k and not need to put everything over it into pensions?

You basically don’t want to land anywhere between £100m and £125k.

This happened to us last year. We didn’t have to pay anything back. We just lost the tax free element from when we renewed

Landing between them is fine generally - yes it's a high marginal rate but you are still better off.

It's when you also lose £2k a year in tax free childcare, plus however many thousands the free hours are worth that can mean you end up worse off depending on what the actual figures end up at.

If the bonus really is unexpected just put it into the pension as you weren't budgeting for it anyway.

In 20 or 30 years or whatever it is, your future self will thank you.

Sounds like your husband has a promising career ahead of him and money really shouldn't be an issue if you plan properly.

No idea - but I'm surprised people on such high salaries get so much free childcare.

This. It's definitely worth paying extra pension contributions to get adjusted net income under £100k whilst you have nursery age children. Without the nursery fees it's more of a judgement call (as the only consideration is the 62% effective tax band), but you can genuinely end up worse off as a result of losing the funded hours and tax-free childcare

They don't- that's the point of the OPs query. And remember they've already lost their child benefit (the limit is now £80k adjusted net income but until recently it was £60k so I imagine OP's family have long since exceeded that)

Sounds like you shouldn't have declared under 100k.

He’ll pay 60 per cent tax on that money and you’ll lose the childcare stuff. Not worth it, you’ll lose money, put it on the pension

If your salary is £95k and you know you're getting a bonus, then that bonus being over £5k really doesn't seem unexpected to me.

Sorry, I missed the bit in the OP where she said the DC are now out of nursery. My comment above is therefore less relevant to the OP but still relevant to others with nursery age DCs 🙂

Call them - similar happened to us and they were great. Just explain the situation.

Yes this is the answer. You don't have to pay unless they see you as deliberately careless which an unexpected bonus isn't. You'll just lose TFC when you renew.

We worked out anything between £100 - £125K would make losing the tax free childcare not worth it. But we pay one full time nursery place and wrap around care at school for the other.

I'd put as much as you can into the pension

You don't have to pay anything back now but when you renew you lose your tax free element. Your DH salary is below the £100K and if the bonus is unexpected (or the amount it) then I'm not sure how you could say any earlier than when you next renew that you would be over the threshold.