Staying under £100K to keep 15/30 hours free childcare

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  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    What an absolute cheek! You earn £100k a year, why should I pay for your childcare?

    You could easily say he’s paying his own childcare given the level of tax and NIC he’ll pay on £100,000
  • someone earning 100k working in london and paying childcare for 2 children and rent and commuting costs could well be having less take home than someone earning minimum wage with childcare and rent paid for.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Tabbytabitha
    Tabbytabitha Posts: 4,684
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    I'm a non-earner or earn less than £3,600
    You can receive 20% tax relief even if you are a low or non-earner. Your pension contribution limit is £3,600 gross - a payment of £2,880 to which the taxman adds £720. This is the case even for people who don't pay tax, such as most children and non-earning spouses.

    That's irrelevant to the question of deprivation of capital which is what's under discussion.
  • Tabbytabitha
    Tabbytabitha Posts: 4,684
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    legal methods to deprive themselves of capital are fine - replacing their old banger, 10 year old appliances, thread bear carpets, taking a non extravigant holiday, buying a house to live in - all perfectly legal ways of reducing their capital. Giving 100k to their children, buying a top of the range sports car, going on a month long holiday to the bahamas are not legal means of depriving themselves of capital

    someone getting a 25k inheritance could very easily spend 9k to get below the 16k level by doing some of the things I have mentioned and in doing so can substantially improve their lives - all legal and above board. Just keep receipts and make sure it is considered legitimate spending.

    Having £16k capital will still affect means tested benefits, just not stop them entirely.
  • xylophone
    xylophone Posts: 44,140
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    Are you saying that someone living on means tested benefits could put a large inheritance straight into a pension without it being considered deprivation?

    No - the amount that can be contributed to a pension and receive tax relief is the higher of £3,600 (gross) or relevant earnings up to the annual allowance.

    A person with no relevant earnings could contribute £2880 to a stakeholder pension for example and receive tax relief of £720.

    He could take that £2800 from his savings - this could not be seen as deprivation if his significant operative purpose was to make provision for later life.

    Of course he could not obtain access to the pension before the relevant age (currently 55 but planned to increase) and once he reached pension credit age he would be expected to use his pension towards supporting himself.

    See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417473/pension-flexibilities-dwp-benefits.pdf
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    That's irrelevant to the question of deprivation of capital which is what's under discussion.

    Capital will be irrelevant for 30hrs free childcare. If would be deprivation of income that would be considered (if it even applies to this scheme).
  • Capital will be irrelevant for 30hrs free childcare. If would be deprivation of income that would be considered (if it even applies to this scheme).

    tabbytabitha was saying it is unfair that someone can sacrifice their income into a pension to keep childcare but someone on benefits can't sacrifice their inheritance into a pension to keep benefits as it would be considered deprivation of capital.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    tabbytabitha was saying it is unfair that someone can sacrifice their income into a pension to keep childcare but someone on benefits can't sacrifice their inheritance into a pension to keep benefits as it would be considered deprivation of capital.

    Perhaps unfair but no different to tax credit rules so not really anything new.
  • Tabbytabitha
    Tabbytabitha Posts: 4,684
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    xylophone wrote: »
    No - the amount that can be contributed to a pension and receive tax relief is the higher of £3,600 (gross) or relevant earnings up to the annual allowance.

    A person with no relevant earnings could contribute £2880 to a stakeholder pension for example and receive tax relief of £720.

    He could take that £2800 from his savings - this could not be seen as deprivation if his significant operative purpose was to make provision for later life.

    Of course he could not obtain access to the pension before the relevant age (currently 55 but planned to increase) and once he reached pension credit age he would be expected to use his pension towards supporting himself.

    See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417473/pension-flexibilities-dwp-benefits.pdf
    tabbytabitha was saying it is unfair that someone can sacrifice their income into a pension to keep childcare but someone on benefits can't sacrifice their inheritance into a pension to keep benefits as it would be considered deprivation of capital.

    Thank goodness someone else can read what I've written!
  • Tabbytabitha
    Tabbytabitha Posts: 4,684
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    Perhaps unfair but no different to tax credit rules so not really anything new.

    What have tax credits got to do with it - they're not affected by capital, apart from interest on it..
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