Tax-free childcare

Fuzzybear112

Just seeking a bit of clarification. New user so go easy!

Situation is I work in NHS and contribute to NHS pension. This year for the first time I will earn >100k (£101,500). I am in receipt of tax-free childcare and understand there is a 100k limit on either parent (my wife earns much less than I do).

With the NHS, I assume the pension comes out before tax? Does this make my adjusted income (or whatever it is called) less than the 100k limit for tax free childcare?

Last year I contributed about £10,000 to my NHS pension.

Also, am I likely to be asked to complete a self-assessment from now on now that I am (slightly) over 100k income? Ironically, this will likely fall back below the threshold next year!

xylophone

https://www.att.org.uk/tax-free-child-care-earnings-over-%C2%A3100000 may be of interest.

But note that NHS pension contributions are taken before tax is deducted. This is "net pay" rather than "relief at source".

See also https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/ which may be of interest.

Fuzzybear112

Thanks for the reply.

"But note that NHS pension contributions are taken before tax is deducted. This is "net pay" rather than "relief at source".

Can you explain what that means in real terms with respect to my example?

xylophone

You are looking at "adjusted net income" - see first link.

Your contributions to the NHS pension scheme are paid gross that is, before tax is deducted ( so called "net pay") - this means that you automatically receive all relief due - with a "relief at source" arrangement, the pension contribution is deducted after tax and the pension provider claims 20% relief - higher rate tax payers have to claim any additional relief due from HMRC.

Now see

https://www.gov.uk/guidance/adjusted-net-income

Adjusted net income is total taxable income before any Personal Allowances and less certain tax reliefs, for example:


trading losses

donations made to charities through Gift Aid - take off the ‘grossed-up’ amount

pension contributions paid gross (before tax relief)