Tax Credits - will I have to repay free childcare costs if I have earned too much?

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Hi all,

My partner and I are self employed and on working / child tax credits, and we received a letter from our council stating that we are entitled to 15 hours of free childcare for our 2 year old daughter, so she has been attending a local nursery since November 2015.

However, we have just done our accounts for the tax year 2014-2015 and realised we have earned more than the £16,000 threshold for tax credits and free childcare entitlement this year. Our concerns are:

-Are we going to have to pay back all of our tax credits for this year and how will they ask for it ie in a lump sum or can you do it in instalments?

-But our main worry is are we going to have to pay back the free childcare costs? This would add up to several thousand pounds!

Any advice or info welcome. Many thanks.

Comments

  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    edited 16 March 2016 at 10:50PM
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    Hi all,

    My partner and I are self employed and on working / child tax credits, and we received a letter from our council stating that we are entitled to 15 hours of free childcare for our 2 year old daughter, so she has been attending a local nursery since November 2015.

    However, we have just done our accounts for the tax year 2014-2015 and realised we have earned more than the £16,000 threshold for tax credits and free childcare entitlement this year. Our concerns are:

    -Are we going to have to pay back all of our tax credits for this year and how will they ask for it ie in a lump sum or can you do it in instalments?

    -But our main worry is are we going to have to pay back the free childcare costs? This would add up to several thousand pounds!

    Any advice or info welcome. Many thanks.

    You need to separate the two issues.

    The £16,000 is the criteria for free childcare for those aged 2.

    It's isn't a criteria for actually receiving tax credits, that is based on your specific circumstances including what you had estimated your income originally. However it's now far too late to update your 2014/15 income with tax credits, the deadline was 31st January.

    What was the estimate you gave for 2014/15?

    What is the actual figure?

    What have you estimated for 2015/16?
  • pennyw_whitehead
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    Sorry I meant for 2015-2016! Baby brain. We earned around £20,000...
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
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    Sorry I meant for 2015-2016! Baby brain. We earned around £20,000...

    £20,000 for what year?

    I would need details for both 2014/15 and 2015/16 as that's what's used to calculate your tax credits.
  • pennyw_whitehead
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    Oh I see. 2014-15 would have been around £15000...
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
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    If you earned
    - £15,000 in 2014/15
    - £20,000 in 2015/16

    then your 2015/16 will still be based on £15,000 due to the £5000 disregard for income increases.
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