Have I made a mistake? Childcare vouchers

flabadabado

Hi,

We currently have an annual income of £24,955 and child care costs averaging at £90 a week for one child.

We have recently started buying vouchers at £233 to pay for her nursery place. I informed the tax credit people of this fact and they reassessed our claim. We've now dropped to a quarter of what our child tax allowance was prior to these changes.

I had previously looked online and at our previous award notice and saw that we were receiving £700 a year in child care element of WTC. Thinking that as we'd be able to buy £233 of vouchers for £150 it was a larger saving than the £700 spread monthly, we opted in to the scheme.

I have just done the online calculator on here and it gives a rough estimate that we'd be entitled to £60 a week towards childcare so we shouldnt take the vouchers.

I rang the CTC helpline today to chase up the letter we should've had with our new award information on it and to check why the payments had dropped significantly. (They've quartered which suggests we were getting more than the £700 wtc childcare element on the award).

The lady on the phone told me since I clearly don't understand the system I should learn it and she wouldn't 'divulge anything on my file.' I've used entitled to, the tax credit site, CAB and obviously here and I still don't understand!

Are we better off with the vouchers?

Thanks so much for all your help

Flab

flabadabado

Thank you for reply, I realise that it's one or the other. I just dont know which option is best! I've been given massively conflicting advice and was hoping someone on here would know. From what I've seen, there's very few questions that the good folks of MSE can't answer!

corbyboy

HMRC have a proper calculator to tell you if you are better off with childcare vouchers or tax credits.

Find it here.

flabadabado

Yep I'm worse off. Ooops

Oh well onwards and upwards!

If I cancel the vouchers and inform the tax credit people of another change in circumstance will they think I'm doing something dodgy?

I'll obviously explain why we're doing it but will they need proof that we've cancelled and how would we prove it? I'm assuming payslips etc but just a bit concerned that if we have to wait a couple of months we'll be even worse off as we'll be paying full costs with no relief from vouchers or tax credits.

Thanks ever so much for the advice so far, I find it so confusing!!

flabadabado

It is our joint income, just the one kid (thirty at work though lol)

Thanks for your kind offer, you're right I do seem better off with credits

Do you have to be some kind of number machine to work there? It's mind boggling!!

flabadabado

flabadabado wrote: »

Yep I'm worse off. Ooops

Oh well onwards and upwards!

If I cancel the vouchers and inform the tax credit people of another change in circumstance will they think I'm doing something dodgy?

I'll obviously explain why we're doing it but will they need proof that we've cancelled and how would we prove it? I'm assuming payslips etc but just a bit concerned that if we have to wait a couple of months we'll be even worse off as we'll be paying full costs with no relief from vouchers or tax credits.

Thanks ever so much for the advice so far, I find it so confusing!!

Bumping in case anyone knows anything about the above?

Icequeen99

The reason you calculated wrong (and probably the MSE calculator did) is down to a common mistake that childcare costs only affect the childcare element of WTC.

Although you were getting only £700 of the actual childcare element of Working Tax Credit, you probably were getting more Child Tax Credit than you would have done if you didn't include any childcare costs in your claim. You have to take that into account as well.

It is very complicated so don't worry about it, good thing is you know now.

With the changes that are coming to tax credits from April 2011, you will need to reassess your situation as the amount of support you get for childcare from tax credits will fall from April which means some people who were better off on tax credits are now better off on vouchers.

Good luck

IQ

flabadabado

Thanks so much for replying, just wondering if I cancel the vouchers and inform the tax credit people will they need some kind of proof that we've actually cancelled? How would we prove it and would it take long?

Sorry for all the questions but if we cancel the vouchers and then dont get the childcare element we'll be having to pay the full whack...

corbyboy

How much is the difference?

You get £233 of vouchers for £150, does this include the savings you will make on tax and NI?

If I were you and the difference wasn't massive I would stick with the vouchers. At least you are in control and you don't have to rely on HMRC's calculations which they seem to get wrong quite often.

Tax credits are changing a lot over the next few years so at least you won't have to deal with the inevitable hassle that will ensue when the system changes.

flabadabado

That takes into account the savings from tax and NI. The difference is just under £700 accross the year. Looking at the changes from April we would still be better off without teh vouchers. So will bite the bullet, cancel and phone to change back. If I'm going to get our CC paid off I need to maximise our finances in every way.

Thanks ever so much