Clarification on Adjusted Net Income and 30 Free Childcare Hours Eligibility

Maka344

I work in state education and will be earning £110,000 from September this year. I contribute 11.7% of my salary to the Teachers Pension Scheme, which I understand operates under a Net Pay Arrangement.

As I understand it, under the Net Pay method, pension contributions are taken before tax and full tax relief is applied at source. Therefore, for the purposes of calculating my Adjusted Net Income (ANI), I would deduct the actual amount contributed — £12,870 — from my gross salary, rather than a grossed-up figure. This results in an ANI of £97,130.

Given this, and the fact I have no other income, I believe I remain under the £100,000 threshold and therefore qualify for the 30 free hours of childcare.

I have twins who will require childcare from next April, and access to these hours would make a significant difference to our financial situation. 

I’d be very grateful if you could confirm whether my understanding is correct, or advise me if there’s anything I’ve overlooked.

Many thanks in advance for your time and guidance.

Isthisforreal99

Your undestanding is more or less correct - look at your taxable pay on your monthly payslips to see what the ANI figure for your salary would be.

You say no other income - no taxable benefits from employment, no investment income (including savings interest)?

Maka344

Isthisforreal99 said:

Your undestanding is more or less correct - look at your taxable pay on your monthly payslips to see what the ANI figure for your salary would be.

You say no other income - no taxable benefits from employment, no investment income (including savings interest)?

Thank you, that’s correct. As a teacher, I don’t receive any taxable benefits such as private healthcare or a car allowance, and I have no additional income — all my savings are held in ISAs.

The £110k salary is a promotion from my current salary of around £97k. Based on my current payslips, my taxable income (after pension deductions under the Net Pay Arrangement) is around £87,209.

Using the same logic, I’ve calculated that my new £110k salary would be adjusted down to £97,130 for the purposes of Adjusted Net Income (i.e. £110,000 – £12,870 pension contribution at 11.7%).

Dazed_and_C0nfused

Maka344 said:

Isthisforreal99 said:

Your undestanding is more or less correct - look at your taxable pay on your monthly payslips to see what the ANI figure for your salary would be.

You say no other income - no taxable benefits from employment, no investment income (including savings interest)?

Thank you, that’s correct. As a teacher, I don’t receive any taxable benefits such as private healthcare or a car allowance, and I have no additional income — all my savings are held in ISAs.

The £110k salary is a promotion from my current salary of around £97k. Based on my current payslips, my taxable income (after pension deductions under the Net Pay Arrangement) is around £87,209.

Using the same logic, I’ve calculated that my new £110k salary would be adjusted down to £97,130 for the purposes of Adjusted Net Income (i.e. £110,000 – £12,870 pension contribution at 11.7%).

You are overcomplicating this a little.

When calculating your ANI the normal starting point is your taxable income.  Including non taxable income is unnecessary really.  Are you including your ISA interest and then discounting it later on 🤔

So based on your figures the starting point will be ~£97k.  The "salary" of £110k is irrelevant.