Tax Free Childcare - Commission Based Salary?

I work in a commission based sales role and therefore do not have a static monthly/annual salary. I won’t know my annual salary until pretty much the last hours of 31st March each year. My base salary along with commission that I earn leaves me hovering around the 100k mark come the end of the year. It can be under when clients are not buying so much and it can be over when things are good. How does someone in this position judge in September if they are eligible for Tax Free Childcare when they won’t know if they are under or over 100k for another 6 months? What would happen if I was on track to earn under, took the tax free childcare allowance but in the last quarter a bumper payout sees me creep over it? Would there need to be a repayment of any funds paid out in that tax year? Is this something that is declared on each of the 3 monthly checks and you just don’t get the government money until you declare you are back under it?

Hi GG-5757,

Tax-Free Childcare (TFC) income requirements are based on expected earnings, and (at the upper end of the income scale) to be eligible for TFC, you must not expect your adjusted net income to exceed £100,000 in the tax year. If you believe at the time of your application your income will exceed the £100,000 limit in the current tax year, you would not be eligible to apply. A customer is required to take reasonable care when determining their income expectations. They should consider their income relative to that received in the previous year and take an objective view of income that they are likely to receive for the remainder of the tax year, so that they can be satisfied it is likely to be under the maximum limit when they make their in-year TFC declarations.

Customers’ income is reviewed at application stage to see if it exceeds this limit, and at each subsequent 3 month reconfirmation to ensure they continue to meet TFC income requirements, by confirming they are not expecting their adjusted net income will exceed £100,000 come the end of the tax year. TFC will contact customers if further details are required to clarify they do reasonably expect to earn less than this upper income limit. A customer would be expected to be able to explain, when requested, why they believed they would not exceed the maximum limit each time they reconfirm their eligibility.  

Customers whose income fluctuates in-year are required to consider - each time they reconfirm - whether the earnings they might receive over the next eligibility period (usually 3 months) would reasonably lead them to exceed the upper income limit by the end of the tax year. These considerations should take account of whatever information the customer has to hand (e.g. past year comparisons, any indications from their employer, etc) so that they come to a reasonable conclusion. Where they think their next quarter’s income would lead them to exceed the upper income limit, they should not reconfirm for TFC. But, where customers believe their income might still not exceed £100,000 by the end of the year, they can reconfirm for TFC (and review the situation again at their next reconfirmation).

Customers whose income is seen to have exceeded £100,000 within the tax year, will not be eligible to reconfirm for any remaining quarters over the year – so their next reconfirmation will be rejected, and access to TFC top-up payments will cease. Ordinarily customers would not be required to repay any top-up payments they have already unless – based on later compliance checks - it was found the information they had previously provided was false or unreasonable.

Thank you.


 

Hi there, This is great to know thank you. I’m in the same boat in that my salary is 50% commission based, however even with my base plus commission, if I hit 100% I still am not near to the 100k mark. If I get accelerators due to an exceptional performance, this can hover just above 100k but this is rare. As I don’t expect to earn over the 100k mark, I was just wondering what the protocol was if I did. From the above message I assume I wouldn’t have to repay what has already been used. I’ve had fairly tough targets and so do not expect to earn over 100k but it’s a low possibility. Many thanks, Rachel

Hi Rachel,
Please contact our Childcare Service team for advice.
Childcare Service helpline
Thank you.