Childcare vouchers and earnings assessment

rory_GB

I was wondering if I could get some advice, I am in the 40% tax bracket but I have a child at nursery and I claim childcare vouchers. On my account it says I am a basic rate tax payer as I can only assume my HR and payrol have not updated the earnings assessment. For most of 2023 I claimed just £100 a month, but I have started claiming £243 a month, for 2023-2024 this will be ok as I haven't gone over threshold but if I keep it at £243 for 2024-2025 what will happen. My wife claims the child benefit so I do tax self asessment, I was wondering if I will be hit with a bill in which case I will just revert to £124, if there is no likely impact to me I would happily keep it at £243. Sorry if the grammar is poor I'm writing this on my phone. Many thanks. 

r6mile

No idea about the specifics of this but have you looked into whether you might better off using Tax Free Childcare? I looked into this in 2018 when I had my first child and could have used either, but worked out that TFC was better for me so have been using that since (I have 3 kids now).

This will give you a good overview of the two schemes - https://www.moneysavingexpert.com/family/childcare-vouchers/

sheramber

rory_GB said:

I was wondering if I could get some advice, I am in the 40% tax bracket but I have a child at nursery and I claim childcare vouchers. On my account it says I am a basic rate tax payer as I can only assume my HR and payrol have not updated the earnings assessment. For most of 2023 I claimed just £100 a month, but I have started claiming £243 a month, for 2023-2024 this will be ok as I haven't gone over threshold but if I keep it at £243 for 2024-2025 what will happen. My wife claims the child benefit so I do tax self asessment, I was wondering if I will be hit with a bill in which case I will just revert to £124, if there is no likely impact to me I would happily keep it at £243. Sorry if the grammar is poor I'm writing this on my phone. Many thanks. 

Your employer should do an earnings  assessment at the start of the year to check whether you will be a higher rate taxpayer. 

rory_GB

sheramber said:

rory_GB said:

I was wondering if I could get some advice, I am in the 40% tax bracket but I have a child at nursery and I claim childcare vouchers. On my account it says I am a basic rate tax payer as I can only assume my HR and payrol have not updated the earnings assessment. For most of 2023 I claimed just £100 a month, but I have started claiming £243 a month, for 2023-2024 this will be ok as I haven't gone over threshold but if I keep it at £243 for 2024-2025 what will happen. My wife claims the child benefit so I do tax self asessment, I was wondering if I will be hit with a bill in which case I will just revert to £124, if there is no likely impact to me I would happily keep it at £243. Sorry if the grammar is poor I'm writing this on my phone. Many thanks. 

Your employer should do an earnings  assessment at the start of the year to check whether you will be a higher rate taxpayer. 

Yes but I don't believe they have or will, my question is if they haven't am I still liable when I do my self assessment or are they liable as they provide the earnings assessment to my voucher provider 

Frugal_Gaz

Did you ever make any progress on this? I enquired with my employer and they didn't even know what a basic earnings assessment is/was? My pay has been increasing, so this is becoming a potential issue.

I did find this on the HMRC site (my bold):

<QUOTE>

If you joined a childcare voucher scheme or a directly contracted childcare scheme on or before 4 October 2018
You can keep getting vouchers or directly contracted childcare as long as:
your wages were adjusted on or before 4 October 2018
you stay with the same employer and they continue to run the scheme
you do not take an unpaid career break of longer than a year
You can take up to £55 a week of your wages, which you do not pay tax or National Insurance on.

How much you can take depends on the amount you earn and when you joined the scheme.
<END QUOTE>

I did wonder if the bit in bold means the rate is no longer adjusted?

Would appreciate anyone's thoughts...

Gaz

sheramber

Frugal_Gaz said:

Did you ever make any progress on this? I enquired with my employer and they didn't even know what a basic earnings assessment is/was? My pay has been increasing, so this is becoming a potential issue.

I did find this on the HMRC site (my bold):

<QUOTE>

If you joined a childcare voucher scheme or a directly contracted childcare scheme on or before 4 October 2018
You can keep getting vouchers or directly contracted childcare as long as:
your wages were adjusted on or before 4 October 2018
you stay with the same employer and they continue to run the scheme
you do not take an unpaid career break of longer than a year
You can take up to £55 a week of your wages, which you do not pay tax or National Insurance on.

How much you can take depends on the amount you earn and when you joined the scheme.
<END QUOTE>

I did wonder if the bit in bold means the rate is no longer adjusted?

Would appreciate anyone's thoughts...

Gaz

https://www.thepensionsregulator.gov.uk/en/about-us/work-for-us/childcare-vouchers-policy

7. Employees who joined the scheme on or before 5 April 2011

If you joined our childcare voucher scheme on or before 5 April 2011 and have not subsequently withdrawn from the scheme you will retain the level of tax and NI savings you were entitled to prior to 5 April 2011 until you leave the scheme or are no longer eligible to receive childcare vouchers (eg if your child no longer receives qualifying childcare).
An annual basic earnings assessment will not be necessary.

Frugal_Gaz

Thanks for that.  Unfortunately I joined in 2014/5, so I'm in a bit of a no-man's land.  It's all very vague...

sheramber

Frugal_Gaz said:

Thanks for that.  Unfortunately I joined in 2014/5, so I'm in a bit of a no-man's land.  It's all very vague...

It is not vague.

The different rule only applies to those who joined before April 2011. 

If you joined after April 2011 then your employer is required to do an earnings assessment each year and adjust the voucher allowance if appropriate. 

Frugal_Gaz

Thanks @sheramber

Would they be legally required to do that, I'm guessing so.  Do you happen to know the source document that specifies it? Is it from HMRC?

Thanks

macy08

https://www.gov.uk/government/publications/employer-supported-childcare