Delay grossing up payment until next tax year?

Crg12

Hi all,

I’m seeking some advice please regarding wraparound childcare payments provided by my employer (public sector) and tax.

Currently, I pay my childcare bill each month and then submit an expense claim to reclaim the cost. The reimbursement is treated as a taxable benefit, and my employer applies 'grossing up' to cover the tax liability.

If I continue submitting these claims for the next four months (December, January, February, and March), my total income for this tax year will exceed the 40% tax threshold (£50,270) and reach £52,100. This would result in me paying 40% tax on the £1,829 that exceeds the threshold.

However, I understand that we are allowed to submit backdated claims for up to six months. My thought is to delay claiming these expenses until April 2026 and then submit the four months’ worth of expenses in the new tax year

I assume this approach would reduce my gross income for the current tax year and shift the taxable benefit into the next tax year, potentially avoiding the higher tax rate.

I could be completely wrong in my thinking. Any advice would be greatly appreciated.

Below is a statement from my employer’s booklet regarding wraparound childcare for reference.

WAC claims which miss the payroll cut-off date will be paid and grossed up in the following month’s payslip. SP may need to consider this when submitting claims in March, as claims submitted after the payroll cut-off date in March (paid in April) will be treated as income in the following tax year.

Grumpy_chap

Crg12 said:

Hi all,

I’m seeking some advice please regarding wraparound childcare payments provided by my employer (public sector) and tax.

Currently, I pay my childcare bill each month and then submit an expense claim to reclaim the cost. The reimbursement is treated as a taxable benefit, and my employer applies 'grossing up' to cover the tax liability.

If I continue submitting these claims for the next four months (December, January, February, and March), my total income for this tax year will exceed the 40% tax threshold (£50,270) and reach £52,100. This would result in me paying 40% tax on the £1,829 that exceeds the threshold.

However, I understand that we are allowed to submit backdated claims for up to six months. My thought is to delay claiming these expenses until April 2026 and then submit the four months’ worth of expenses in the new tax year

I assume this approach would reduce my gross income for the current tax year and shift the taxable benefit into the next tax year, potentially avoiding the higher tax rate.

I could be completely wrong in my thinking. Any advice would be greatly appreciated.

Below is a statement from my employer’s booklet regarding wraparound childcare for reference.

WAC claims which miss the payroll cut-off date will be paid and grossed up in the following month’s payslip. SP may need to consider this when submitting claims in March, as claims submitted after the payroll cut-off date in March (paid in April) will be treated as income in the following tax year.

If you are that close to the 40% IT threshold this year, won't the effect of delaying the claim for the final four months simply be to result in higher income and more in the 40% threshold next year?
Do you expect your income to otherwise be lower next year? 
(Even allowing for any inflation-rise that you may benefit from?)
There are no indications of changes to tax thresholds.

If the payment of a small amount of 40% IT is that much of a concern, have you considered options that you may have to increase pension contributions?  Are you able to take advantage of SS?

Crg12

Hi thanks for the reply.

Yes kind of.  For more context this year I've received an extra allowance of £3000 for being away which I definitely won't receive next year.  This is a one off tax year where I'll be pushed over.

It more to get an understanding of if this is something I could do as I've never ever considered being close to the 40% threshold before.

With regards to pension contributions. Mine is none contributory from my salary.  There is an option to buy added pension but it has little reward for the outlay and would involve setting up a 12 month contract which takes monthly payments.  The other option is a one of payment which I could do but I would have to fill out a self assessment tax return. Which i want to avoid.

As you say it's only a small amount of IT i'd pay over the 40% but every little helps.  Plus it'll be good to know I'm correct in thinking it's allowed.

Obviously this would be an issue if the personal allowance increased but it seems like 2028 will become 2030.

Dazed_and_C0nfused

Crg12 said:

Hi thanks for the reply.

Yes kind of.  For more context this year I've received an extra allowance of £3000 for being away which I definitely won't receive next year.  This is a one off tax year where I'll be pushed over.

It more to get an understanding of if this is something I could do as I've never ever considered being close to the 40% threshold before.

With regards to pension contributions. Mine is none contributory from my salary.  There is an option to buy added pension but it has little reward for the outlay and would involve setting up a 12 month contract which takes monthly payments.  The other option is a one of payment which I could do but I would have to fill out a self assessment tax return. Which i want to avoid.

As you say it's only a small amount of IT i'd pay over the 40% but every little helps.  Plus it'll be good to know I'm correct in thinking it's allowed.

Obviously this would be an issue if the personal allowance increased but it seems like 2028 will become 2030.

Who told you those two things?

sheramber

Crg12 said:

Hi all,

I’m seeking some advice please regarding wraparound childcare payments provided by my employer (public sector) and tax.

Currently, I pay my childcare bill each month and then submit an expense claim to reclaim the cost. The reimbursement is treated as a taxable benefit, and my employer applies 'grossing up' to cover the tax liability.

If I continue submitting these claims for the next four months (December, January, February, and March), my total income for this tax year will exceed the 40% tax threshold (£50,270) and reach £52,100. This would result in me paying 40% tax on the £1,829 that exceeds the threshold.

However, I understand that we are allowed to submit backdated claims for up to six months. My thought is to delay claiming these expenses until April 2026 and then submit the four months’ worth of expenses in the new tax year

I assume this approach would reduce my gross income for the current tax year and shift the taxable benefit into the next tax year, potentially avoiding the higher tax rate.

I could be completely wrong in my thinking. Any advice would be greatly appreciated.

Below is a statement from my employer’s booklet regarding wraparound childcare for reference.

WAC claims which miss the payroll cut-off date will be paid and grossed up in the following month’s payslip. SP may need to consider this when submitting claims in March, as claims submitted after the payroll cut-off date in March (paid in April) will be treated as income in the following tax year.

You would need to check with your employer that they agree to delaying  4 months. That statement only talks about one month 

Crg12

Dazed_and_C0nfused said:

Crg12 said:

Hi thanks for the reply.

Yes kind of.  For more context this year I've received an extra allowance of £3000 for being away which I definitely won't receive next year.  This is a one off tax year where I'll be pushed over.

It more to get an understanding of if this is something I could do as I've never ever considered being close to the 40% threshold before.

With regards to pension contributions. Mine is none contributory from my salary.  There is an option to buy added pension but it has little reward for the outlay and would involve setting up a 12 month contract which takes monthly payments.  The other option is a one of payment which I could do but I would have to fill out a self assessment tax return. Which i want to avoid.

As you say it's only a small amount of IT i'd pay over the 40% but every little helps.  Plus it'll be good to know I'm correct in thinking it's allowed.

Obviously this would be an issue if the personal allowance increased but it seems like 2028 will become 2030.

Who told you those two things?

I haven't been told but it's what I can gather from the policy extracts below:

Only one Added Pension contract can be taken out per scheme year. You can choose to pay your Added Pension contributions either by monthly deductions from your salary or by making a lump sum payment. You will not be able to make both monthly contributions and a lump sum payment in the same scheme year. Each added pension contract only lasts for one scheme year.

Added Pension contributions taken directly from salary are deducted before income tax is calculated, however those who purchase Added Pension with a lump sum must reclaim the income tax relief direct from HMRC. This can be completed via self-assessment tax return or, if you do not complete self-assessment.

The contract is for monthly contributions of £136 per month: (12 x £136 payments taken from salary over the year, a total of £1632). The member will then receive an additional £100 a year when their pension comes into payment.

Grumpy_chap

Crg12 said:

Added Pension contributions taken directly from salary are deducted before income tax is calculated, 

The contract is for monthly contributions of £136 per month: (12 x £136 payments taken from salary over the year, a total of £1632). The member will then receive an additional £100 a year when their pension comes into payment.

So, a basic rate tax payer will gain £100 per year additional DB pension in return for a £1,632 contribution which has only cost £1,360 net of income tax (even less if also considering NI, often another 8% meaning £1,275 cost for the £1,632 contribution).

Ignoring whether the £100 per year increases prior to coming into payment (it may well do), anyone expecting to live 13 years into retirement is doing well.

Even more favourable if higher rate tax is avoided.  (Will only have cost about £1,150.)

Crg12

sheramber said:

Crg12 said:

Hi all,

I’m seeking some advice please regarding wraparound childcare payments provided by my employer (public sector) and tax.

Currently, I pay my childcare bill each month and then submit an expense claim to reclaim the cost. The reimbursement is treated as a taxable benefit, and my employer applies 'grossing up' to cover the tax liability.

If I continue submitting these claims for the next four months (December, January, February, and March), my total income for this tax year will exceed the 40% tax threshold (£50,270) and reach £52,100. This would result in me paying 40% tax on the £1,829 that exceeds the threshold.

However, I understand that we are allowed to submit backdated claims for up to six months. My thought is to delay claiming these expenses until April 2026 and then submit the four months’ worth of expenses in the new tax year

I assume this approach would reduce my gross income for the current tax year and shift the taxable benefit into the next tax year, potentially avoiding the higher tax rate.

I could be completely wrong in my thinking. Any advice would be greatly appreciated.

Below is a statement from my employer’s booklet regarding wraparound childcare for reference.

WAC claims which miss the payroll cut-off date will be paid and grossed up in the following month’s payslip. SP may need to consider this when submitting claims in March, as claims submitted after the payroll cut-off date in March (paid in April) will be treated as income in the following tax year.

You would need to check with your employer that they agree to delaying  4 months. That statement only talks about one month 

We're allowed to backdate our claims for up to 6 months.  There's no mention of which any particular limits to when in the year.  I came across the following year statement when looking at how they "gross up" the payment and it got me thinking that I could submitted my backdated claims in the new tax year.  As the says the payment and grossing up is done for the tax year in which it's be submitted/paid.

I could be completely wrong hence why I'm trying to find out.  Our HR wouldn't be able to answer any of this as they always say "seek professional advice".  I appreciate a forum isn't professional advice but it is full of kind individuals with founts of knowledge.