Tax credits/childcare voucher confusion

stressedgerty

Hello,

this is my first post, so please be gentle with me!!!

I have claimed tax credits for about 5 years or so now. Since my eldest went into nursery (4 years ago) I also claimed the vouchers deducted through my wages by my employer at the maximum amount allowed. I phoned tax credits today to let them know about a reduction in my childcare and my husbands new salary. The person who answered asked me whether my husband does a 'salary sacrifice'. I said no. He doesn't. When I thought about this, it made me wonder about me? I can't recall ever being asked if I claim vouchers??

When I first was awarded tax credits, we got the basic £500ish per year. This lasted about 2 years. I then had another baby. I was off work so our income lowered. I phoned tax credits and told them. There was suddenly £2000 in my bank account from them. I never for a second thought it was right and immediately phoned them to check and give it back. I was told it was right. I even phoned again to recheck and was told, 'if the information of the form is correct then this is right'. The information was right. The year afterwards even though my income had increased again, we got the increased payments. I am now back to the £500ish per year.

I have googled about this, and it seems to say you cannot claim tax credits and vouchers for the same fees. Now I read it that seems logical! I am confused and wondered if anyone can answer the following question:

-Does the voucher scheme affect the £500ish basic part of the tax credits? Do you still get this when you claim vouchers?
-Which part of the tax credits payment does the voucher affect ( I mean, child element or childcare bit if you see what I mean?).
-What should I do now? I know I need to tell them, but what will happen? What is the process?
-I am really worried that I have received more money than I should. I truly did not realise I had to tell them about this, and do not think (?) they have ever asked about it before. When I look at my notices, there is no mention of the vouchers, or on the checklist that comes with it? I am panicking a bit to be honest but wanted to find out what will happen prior to phoning. Has anyone ever been in a situation like this? I am in no way a dishonest person and the thought of claiming something I am not entitled to (even accidentally) is making me feel quite ill.

Any information or advice would be greatly appreciated.

mitchaa

A family element of £545 is payable to all families earning upto £60k. This does not depend on whether your children are in nursery or not, you will get this regardless.

Depending on your joint incomes dictates as to whether you receive additional premiums and this is called the child element.

From reading your post, your salary is too high to claim the child element hence the £545 family element is all that you get.

Now onto childcare, you cannot use childcare vouchers along with a childcare element that is paid in addition to your normal £545,

Since you are only receiving the basic £545, you are fine, you will not be receiving childcare help through tax credits.

stressedgerty

Hi,

wow what a fast reply. Thank you very much.

What about the years when I did receive more than the basic though??

cw18

You only need to worry if you're receiving the Childcare Element of WTC. Anything you pay using vouvhers (which are deducted from your salary before tax is calculated) cannot be claimed for again through the Tax Credits system. So if your childcare was £200/week and you 'bought' £150 worth of vouchers/week, then the amount you'd be able to delare to Tax Credits would be £50/pw.

The first year with a baby you would normally get double the basic rate anyway.

My guess as to why ALL the extra would be the drop in your income -- it presumably brought you down under a reduction threshhold.

Icequeen1

If you were getting more than the family element, it is possible you will have been overpaid.

The tax credit claim form notes mentions that you cannot claim both - although it is very easy to miss among the other 60 pages!

There have been a few posts about this before and I found some articles on the subject:

http://www.litrg.org.uk/news/latest.cfm?id=599 is the latest one I found.

I think the best thing is to tell HMRC and see what happens as a result. You can dispute an overpayment, so it might be advisable to have a look at the notes etc.....

IQ

TotallyBroke

Can I then please ask a question regarding this. I have recently become a single Mum and my work do salary sacrifice for childcare vouchers. I'm looking into doing this.
My annual salary at the moment is £20,500 and my childcare costs are £125 per week. I would be able to buy a yearly amount of vouchers of £2860 which is £55 per week.
So I would have to tell tax credits that my childcare cost is now going to cost £70 per week and that my annual salary is now £17640 per annum.

Thanks for your help.

mitchaa

TotallyBroke wrote: »

Can I then please ask a question regarding this. I have recently become a single Mum and my work do salary sacrifice for childcare vouchers. I'm looking into doing this.
My annual salary at the moment is £20,500 and my childcare costs are £125 per week. I would be able to buy a yearly amount of vouchers of £2860 which is £55 per week.
So I would have to tell tax credits that my childcare cost is now going to cost £70 per week and that my annual salary is now £17640 per annum.

Thanks for your help.

That is correct yes.

TotallyBroke

Ok so not only do I receive the tax relief on that money but my actual tax credits award would be higher because I would be earning less. So my ctc and wtc would be based on £2000 less wages.
Thanks for the information


I've just been on the entitledto website and it shows I would be entitled to £105 per week. Yet if I put the information in using my full wage and no salary sacrifice I would only be entitled to £127. So a difference of approx £20 yet out of that I would have to find another £55 in childcare costs.
Thanks again I'll definitely be checking it all out now.

cw18

Tax Credits want to know taxable income, so as vouchers come out before paying tax I think you're right you give them your gross after they've been deducted.

But you also need to bear in mind that they pay up to 80% of your childcare through Tax Credit.....

So £2860 through salary sacrifice saves you £572.00 in tax (and could mean you qualify for fractionally more CTC/WTC before the childcare element comes into play). So your £55/week childcare costs you £44 in loss of take home pay (possibly slightly less due to a small increase in CTC/WTC).

But you could also refuse the vouchers and claim the full amount of childcare to Tax Credits. IF you qualify for the full 80% assistance, then you would receive £44 towards the £55, and only have to pay £11 yourself.

stressedgerty

Thanks for the replies. Will check it out!