£100,000.01 - what happens to free childcare?

sunflower2507

Hi there,

I’m new to this forum…

Free childcare support from the government. What happens if due to my bonus I go over £100,000 by 1p in a given tax year? Who do I inform? Do I need to pay back the childcare for the term or whole financial year in question? My baby is yet to go to nursery so I’m not close to the process of securing the free hours but keen to understand what happens should this ever happen. Unfortunately, I only find out my bonus in March so it’s hard to know if I would be close to £100,000 or not until the end of the financial year.

Sorry if someone has already answered this question!

Woodstok2000

You have to reconfirm your eligibility every 3 months i believe, so you would become ineligible once your bonus hit, but then you could become eligible again in the next tax year.

Don't forget its based on adjusted net (taxable) income, not salary, so you can manage your eligibility to an extent with pension and charitable contributions....

vacheron

I'd take a look at this video. Specifically from the 12 minute mark regarding childcare, but I would personally watch all of it given your anticipated income. I have all the time in the world for this guy!

https://www.youtube.com/watch?v=pE2V83OybUo

Grumpy_chap

If the OP has children utilising the free childcare and truly assesses their ANI will be £100,000.01 then make a £100 Gift Aid charitable donation (it could be less but good to have a little headroom) and it will be the best investment ever made.

LessThanSte

This is a very helpful post, as we (courtesy of my wife) are in a similar position.

On a related note, is there a definitive way to check that we are making the correct determination, short of paying a professional to tell us for certain? The specifics; £105k salary, pension contributions gross (I believe) £7k, which i think makes net adjusted income £98k. But then there is healthcare which she pays £80/month or thereabouts out of salary after tax, does that get added or taken away from the net adjusted income? And then if someone is kind and gives a bonus to her, we have to add that pre-tax amount to the running total?

The reason i ask is that she is skirting very close to the threshold, and it would presumably be very easy to either think we are over when in fact we are just under (and thus miss out), or think we are under when we are actually over (and thus presumably be chased with a big bill at some point in the future when/if the feds find out).

Any help appreciated.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81957703#Comment_81957703

The solution, if you think you are near the threshold, might well be to pay extra pension contributions to be sure of coming in sufficiently below the threshold that there is comfort headroom.

For many people, income around £100k and pension contributions around £7k would be insufficient provision for future retirement income at the level one might typically desire. Of course, the individual might have other plans to fund their retirement.

sheramber

https://forums.moneysavingexpert.com/discussion/comment/81957703#Comment_81957703

https://www.gov.uk/guidance/adjusted-net-income

LessThanSte

https://forums.moneysavingexpert.com/discussion/comment/81957869#Comment_81957869

Thanks. For what it's worth, that's her contribution with her company making the same contribution on top. But I think that contribution from work direct didn't get factored in to her net income figure?

On that theme though I remembered she pays in to a former company's private pension by direct debit a nominal amount each month (basically just enough to keep it active). If she was to pay significantly more in to that (say increasing payments to £2-3k/annum), I guess that would take off the net adjusted income also?

https://forums.moneysavingexpert.com/discussion/comment/81958061#Comment_81958061

Thanks, but that is the point. I've seen that, and hundreds of interpretations of it.. But it implies it's on my head to work out and I have to hope that I get it right.. And if I don't I could face a big bill/fine...