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Tax Free Childcare

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Hi,

I am hoping someone on here can help me, I am trying to establish whether we qualify for tax free childcare allowance. 

I currently earn £85k per year, however this year I was paid an unexpected £40k bonus, on top of that I have a company car and healthcare which amounts to a BIK of £10,608. I am currently paying £32,565 per year into my work pension (off top line pay) to reduce the tax due on my bonus and general salary. 

So my questions are: 

1. Do I include the £10,608 when trying to work out adjusted net income to see if I qualify for the tax free childcare? 
2. If so should I put even more into my pension to take my adjusted net income to below £100k? 

Thanks in advance 

Comments

  • Should possibly have also noted I am in Scotland
  • Isthisforreal99
    Isthisforreal99 Posts: 131 Forumite
    100 Posts Name Dropper
    Hi,

    I am hoping someone on here can help me, I am trying to establish whether we qualify for tax free childcare allowance. 

    I currently earn £85k per year, however this year I was paid an unexpected £40k bonus, on top of that I have a company car and healthcare which amounts to a BIK of £10,608. I am currently paying £32,565 per year into my work pension (off top line pay) to reduce the tax due on my bonus and general salary. 

    So my questions are: 

    1. Do I include the £10,608 when trying to work out adjusted net income to see if I qualify for the tax free childcare? 
    2. If so should I put even more into my pension to take my adjusted net income to below £100k? 

    Thanks in advance 
    1) Yes
    2) Yes - you need to be clear on the method of relief - salary sacrifice, net pay arrangement or relief at source.

    Hopefully you mean the bonus was paid this tax year (after 6 April)?
  • 1) Yes the bonus was paid in June 2025. 

    I was caught out and my tax code was changed to a negative to allow HMRC to reclaim the under paid tax, I was only paying £355 per month into my pension, but I have now adjusted this to a higher value to try to reduce the overall tax bill. 

    2) I have asked my employer to increase my pension contribution to £3500 per month, this is being taken before tax and added straight into my pension. I am not sure of the terms, but assume this is classed as Salary Sacrifice? 

    So if I am interpreting your response correctly, I would have to pay an additional £3043 into my pension to take me below £100k adjusted net income? 
  • Isthisforreal99
    Isthisforreal99 Posts: 131 Forumite
    100 Posts Name Dropper
    1) Yes the bonus was paid in June 2025. 

    I was caught out and my tax code was changed to a negative to allow HMRC to reclaim the under paid tax, I was only paying £355 per month into my pension, but I have now adjusted this to a higher value to try to reduce the overall tax bill. 

    2) I have asked my employer to increase my pension contribution to £3500 per month, this is being taken before tax and added straight into my pension. I am not sure of the terms, but assume this is classed as Salary Sacrifice? 

    So if I am interpreting your response correctly, I would have to pay an additional £3043 into my pension to take me below £100k adjusted net income? 
    Salary sacrifice would mean that you were not paying NIC on the sacrificed amount?

    Do you have any other income that would affect your ANI, savings interest, dividends etc - you will need to factor this into your calculation of what further pension payments you need to make.
  • All other savings are in a shares and stocks ISA. 

    I do not know if I am paying NIC as this is the first month that I have altered the pension contribution and I have not been paid yet, I have only just asked my employer to change the contribution as of this month. 
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