Not eligible for Tax Free Childcare

DavidPaulRichard

Is HMRC looking to address the current criteria for this. it seems odd that you can have 2 adults (say mum and dad) earn anything upto 99.9k a year each and benefit from 20% discount but if one person is earning over 100k that and another person on minimum salary, then both not eligible?! Should income threshold be a consideration for the whole household?

peteuk

DavidPaulRichard said:

Is HMRC looking to address the current criteria for this. it seems odd that you can have 2 adults (say mum and dad) earn anything upto 99.9k a year each and benefit from 20% discount but if one person is earning over 100k that and another person on minimum salary, then both not eligible?! Should income threshold be a consideration for the whole household?

This is something that child benefit had when they first brought in the earning limits, however I believe it is down to costs,  its cheaper and easier to view tax codes than it is to make it means tested.  EG As soon as you hit the 100K tax bracket it’s easier to find so they set that as the target earnings. 

In theory if you pay more into a pension it will bring your taxable income back down to under 100K so you’ll benefit from the 20% discount.

DavidPaulRichard

I understand that if I pay more into my pension this will bring my taxable income down, however that sort of defeats the object in that I was looking to get some tax reflect to help me out financially, putting more money into my pension doesn’t help me financially today.

sheramber

HMRC do not set the earnings limits.

These are set by ther Government and HMRC  only put it into practice.

r6mile

DavidPaulRichard said:

I understand that if I pay more into my pension this will bring my taxable income down, however that sort of defeats the object in that I was looking to get some tax reflect to help me out financially, putting more money into my pension doesn’t help me financially today.

Yes but because the 100k is a "cliff-edge" for tax-free childcare and the free childcare hours (unlike the High Income Child Benefit Charge, which is a taper), then you can perversely be much better off on a cash basis "today" by putting in more into your pension.