Will we loose Tax Credit???

pretzel

Hi

Hoping someone can help with this...I;m getting so confused about the new rules due out in April for tax credit.

I live with my partner and one child. My partner works full time and earns £19k a year. I have returned 3 days a week and earn £14,800 a year.

We currently pay £450 a month for the 3 days childcare for my daughter but as both my partner and i work in jobs that operate the childcare voucher schemes, between us we salary sacrifice the whole of the £450 per month under the scheme.

Can anyone advise where this leaves us in relation to tax credits from April?. Do you take the allowance from the voucher scheme off your salary. Will we loose the benefit?

Any help will be appreciated.

Thanks in advance

Pretzel

kitkatt1982

Hi, it's soooo confusing we're in the same boat! I do know though, that if it's salary sacrifice the £450 is deducted before tax so is not classed as taxable income for TC purposes. Therefore, the £450 per month should be taken off the income figure you give tax credits (it will be taken off of your p60 as well). Not sure if this will help too much though as think it may still put you over the income bracket? Do you pay into any private pensions as they should come off too. Good luck x

pretzel

Hi Kittkat

yes we both pay in to company pensions but even with this it won't bring us down to £26k mark.

Thanks anyway for the advise about the salary sacrifice coming off your pay.

kitkatt1982

Hi, just so you know in case you didn't, even though it's probably completely irrellevant now :-( but you are not able to deduct company pension contributions from your taxable income figure on P60 as they are deducted at source, it's only private personal contributions that can be further deducted from this figure. You're still better off with the salary sacrifice than trying to claim childcare element of tax credits but should you choose to have another child at some point in the future, you would probably be better off claiming through them rather than salary sacrifice on your incomes (currently tax credit rates are more favourable for two children but they'll probably scrap this too!)

twinkle10

Actually Tax Credit system will change this year from April 2012. I agree with kitkatt, Company pension contributions will not be deducted from taxable income. There are certain thing which has to be followed for the taxation.

Murgatroyd21

Hi,

Can you confirm a couple of things please.

Is it just the one child you have? You say you started back 3 days a week, when did you start back and was it from maternity leave?

You say your salary is £14800pa, but did you earn that in 2011/12?

It's either the actual income from 2011/12, or the estimate for 2012/13, whichever is lower (remember there's a £2500 disregard to apply) that's used to calculate the award for 2012/13.