Free Childcare

Pointers

Please can someone confrim correct my understanding of this system. I earn £105k per year and my wife earns £41k.  Our child has just turned 12 months and is at child minders. Its understood that from September 1 years olds can receive 15 hours of free childcare?  Its my understanding that noe is available prior to this? 

As far as I can see my wife and I won't be eligible for any free child care or any other form of support because of my salary. If she tried to claim it presumably we would be rejected because of my salary? i.e. she would be asked about our combined salary and this would cause her to be rejected? If i put enough of my salary into my pension via salary sacrifice so that my net salary was lower than £100k would we then be eligible for this free child care in September becuase we were below this threshold. 

This seems strange in that if I earned £99k rather than £100k we eligible for the full 15 hours but because I earn above this threshold we aren't eligible for any help? 

Is there any help available? Anything that we've missed? 

My wife would like to reduce her days but her company have rejected this. If she were only working 2-3 days a week then child care would be less of an issue as child care costs are so high a reduction in her salary could be largely offset by reduced childcare costs. However, she doesn't want to quit her job as she knows that it would be very difficult to start a career again in 3-4 years time. Also, if she were to quit her job she wouldn't be making NI contributions and she is worried her state pension would be affected. 

Any thoughts or ideas on this would be much apreciated.
Thanks     

Pointers

Further to the above we would like to have another child but this would probably mean my wife quitting her job as anything she earned post tax would almost certainly be taken up by child care costs.  

HampshireH

There has to be a cut off somewhere and between you, you have a very good income

She won't be able to apply if your adjusted net income is in excess of £100k as one of the questions specifically asks if she or you earn £100k or more a year. But this is based on adjusted net income.

See below 

https://www.gov.uk/check-eligible-free-childcare-if-youre-working

GrumpyDil

So it may well be worth paying more into any pension you have to bring your adjusted net salary down. 

Pointers

GrumpyDil said:

So it may well be worth paying more into any pension you have to bring your adjusted net salary down. 

Yes, certainly. It seems that this is by far our best option. I need to start putting more in my pension and by doing so I would save on tax (40% at that level) and NI contributions too. Obviously I may then need to pay tax when i eventually draw my pension but that's OK. The lifetime allowance of £1.073m was removed last year, not that I'm likley to get close to this anyway.     

I also have my monthly car leases payments which, I think, would reduce my adjusted net salary? 

My wife's pension pot is very small as she hasn't been able to put much in over the years. Is there any way I can transfer money into her pension and bring down my adjusted net salary that way?  

Are there any other ways to lower adjusted net salary? Any ideas would be much appreciated. 

2childmum2

Regarding NI contributions for your wife. She should register for child benefit even though you earn too much to keep it. This will mean she is credited with the NI credits if she doesn't get them by being employed.
She has the option of choosing not to receive the child benefit, or taking the cash, putting it in a savings account, and you paying it back at the end of the tax year.
We chose to do the latter, partly because we earnt interest on it, and partly in case my husband lost his job - we would still have that money coming in and wouldn't have to try and claim it if he didn't earn over the threshold in any particular year

Pointers

2childmum2 said:

Regarding NI contributions for your wife. She should register for child benefit even though you earn too much to keep it. This will mean she is credited with the NI credits if she doesn't get them by being employed.
She has the option of choosing not to receive the child benefit, or taking the cash, putting it in a savings account, and you paying it back at the end of the tax year.
We chose to do the latter, partly because we earnt interest on it, and partly in case my husband lost his job - we would still have that money coming in and wouldn't have to try and claim it if he didn't earn over the threshold in any particular year

Thanks for this 2childmum2. If she is working and receiving NI credits (so that she'll eventually be eligible for the state pension) what is the benefit of the approach you describe? Will she get more NI credits than she would have done otherwise? 
 

BoGoF

Pointers said:

GrumpyDil said:

So it may well be worth paying more into any pension you have to bring your adjusted net salary down. 

Yes, certainly. It seems that this is by far our best option. I need to start putting more in my pension and by doing so I would save on tax (40% at that level) and NI contributions too. Obviously I may then need to pay tax when i eventually draw my pension but that's OK. The lifetime allowance of £1.073m was removed last year, not that I'm likley to get close to this anyway.     

I also have my monthly car leases payments which, I think, would reduce my adjusted net salary? 

My wife's pension pot is very small as she hasn't been able to put much in over the years. Is there any way I can transfer money into her pension and bring down my adjusted net salary that way?  

Are there any other ways to lower adjusted net salary? Any ideas would be much appreciated. 

Just remember it's net adjusted income not net adjusted salary. You mention car lease payments - is that generating a car benefit. You need to include all benefits in kind and all taxable investment income into the £100k figure

Pointers

BoGoF said:

Pointers said:

GrumpyDil said:

So it may well be worth paying more into any pension you have to bring your adjusted net salary down. 

Yes, certainly. It seems that this is by far our best option. I need to start putting more in my pension and by doing so I would save on tax (40% at that level) and NI contributions too. Obviously I may then need to pay tax when i eventually draw my pension but that's OK. The lifetime allowance of £1.073m was removed last year, not that I'm likley to get close to this anyway.     

I also have my monthly car leases payments which, I think, would reduce my adjusted net salary? 

My wife's pension pot is very small as she hasn't been able to put much in over the years. Is there any way I can transfer money into her pension and bring down my adjusted net salary that way?  

Are there any other ways to lower adjusted net salary? Any ideas would be much appreciated. 

Just remember it's net adjusted income not net adjusted salary. You mention car lease payments - is that generating a car benefit. You need to include all benefits in kind and all taxable investment income into the £100k figure

No, I don't think it is a benefit in kind as I pay the full cost of the lease each month though it is done via salary sacrifice (thus reducing my tax bill) and so could this be considered a BIK? 

400ixl

Pointers said:

2childmum2 said:

Regarding NI contributions for your wife. She should register for child benefit even though you earn too much to keep it. This will mean she is credited with the NI credits if she doesn't get them by being employed.
She has the option of choosing not to receive the child benefit, or taking the cash, putting it in a savings account, and you paying it back at the end of the tax year.
We chose to do the latter, partly because we earnt interest on it, and partly in case my husband lost his job - we would still have that money coming in and wouldn't have to try and claim it if he didn't earn over the threshold in any particular year

Thanks for this 2childmum2. If she is working and receiving NI credits (so that she'll eventually be eligible for the state pension) what is the benefit of the approach you describe? Will she get more NI credits than she would have done otherwise? 
 

No, it would still result in the same. She would get a full years credit, you can't get more than that.

sheramber

If you have deductions under salary sacrifice you are giving up salary to cover the cost of them. 

You cannot deduct them to calculate net adjusted income as that would be double dipping.
That would apply to the lease payments and pension payments if salary sacrifice.

I would suggest you note down your  taxable income per your payslip and all other taxable income such as interest, dividends etc., any benefits from your employer. 

Post that information on the cutting tax board and ask for advice regarding paying more pension payments  to reduce your net adjusted income below £100k.

How you pay extra pension payments depends on what benefit it gives you.