The £100k childcare cliff edge - how is anyone meant to make this work?

Once again, you have missed the point of how the threshold impacts behaviour - and overall tax take.

I earn 1p over £100k, and I lose benefits to the tune of £22k (which is £50k pre tax). The incentives for me to claim the benefit are huge - and if I do so, the government loses ~£26k in tax on that £50k. Plus of course - has to pay me the £22k in childcare support.

No one is just going to ‘suck it up’ when the sums are so enormous.

What silly fiddling?

Why should it be £100k per household? That would exclude far more people and be vastly counterproductive.

Agreed - it should be £100k per HOUSEHOLD.

But still - sorry but you’re going to have to suck that up. £100k is enough. Make some lifestyle changes. It’s what we did and it is not forever.

Sure, the pension value is non-zero. It just doesn't help today with bills - I can't sacrifice down to £100k because that plus my partner's income doesn't cover our housing, loan repayment and living costs. FYI - we live in a 2-bed ex council terrace in zone 3 London, not a rough area but not posh either. But we bought recently with a 10% deposit, no family money, so exhausted all our savings and have a huge mortgage.

I appreciate that many people literally can't do that, but I guess my point is the only way I can earn that flashy income is by living in London and paying exorbitant nursery costs this year, not in the future.

No, most employees don't put anywhere near enough away in their pensions, this would just be good financial management anyway.

And if you are earning way in excess of the 100k mark then the silly fiddling with numbers people are doing to claim they are "worse off" just doesn't wash.

That’s exactly what people do and so the government doesn’t get the tax on that income, but wouldn’t you expect to see some benefit to earning that amount? The rules just don’t make sense.

Also, the person I was replying to was making a comparison to someone earning half the amount (so £50k) - I was explaining why there can be little difference

I think that's a plausible example and a consequence of assessing our income only on an annual basis (for tax) - when in reality it's more complicated than that.

But if you sacrificed £50k out of that £150k a year to take you under the £100k, then won't that mean you aren't paying all that childcare? And if you do it for 2 years that's a total of £100k into the pension which is significant. (Although you'd likely have put a good chunk of that in anyway.) So you do get some of the benefit, it's just delayed and you get it as a pensioner (or you reduce pension contribution in subsequent years)

But I agree £100k isn't as much as it sounds. Partly because of inflation recently. You see this in other posts with people on lower incomes wondering why they suddenly can't afford things they used to. The answer is their income has been eroded. But the headline number still sounds a lot.

IMO nursery costs should be tax deductible - in the year that the income is earned and the costs are paid out.

Well if they are only just on £100k all they need to do is chuck £1000 extra in their pension and they get their 30 free hours and take home £59K

Based on 1 child, single parent with £2.5k a month additional nursery costs (as estimated by previous posters, since I’m past nursery stage), autoenrolment pension and type 1 student loan, someone on £100k takes home £60k, less £30k nursery leaving £30k. Someone on £50k takes home £35k.

People's incomes aren't necessarily stable, particularly women's. Let me explain a very common scenario for women at my workplace.

Graduate mid-20s (usually with masters). By around 30, climb up to the level earning £100k+. Student loan payments shoot up but at least the balance is going down from the 2 degrees and you'll be home free soon.

Great maternity package so stay for a kid or two. Just about manage to make it work for this period, using pregnancy accommodations, taking a non-client facing role temporarily when coming back, etc. Kids will be out of nursery then you'll be home free soon.

Realise by the time the kids start school that this life is not compatible with family and quit for a job earning say £80-90k on better hours.

On paper, there was a period where you earned up to £150k for a few years. Incredible right? But you never got to reap the fruits of it because you either sacrificed into pension or took massive tax hits during the short window of time you had that salary. That could have been a period of building a nest egg and getting ahead on the mortgage etc. But it's just wasted.

And pension sacrifice doesn't pay the bills today. You live in London, mortgage is £3k+, childcare for 2 is £5k+ - you can't pay that on £99k gross. I don't sacrifice into pension beyond employer payments because our household would not be able to make ends meet.

People earning over £100k aren’t supposed to have children, they are supposed to use all their free time to work more to pay for other pwiple’s children.

Or their circumstances are just different. The value of the subsidised hours is thousands of pounds a year. Someone who bought a house a decade earlier might have a mortgage tens of thousands of pounds (or more) smaller. Or they might have social housing. Or a cheaper commute.

Or of course the people you know are getting help or have had a financial leg up from family. There are some people who are lugging behind them student debts, high mortgages and now eye watering childcare costs with absolutely no help from grandparents or future inheritances.

I just really struggle to understand posts like OP's. I know families living in the southeast, with mortgages and kids, on half or even a quarter of a hundred grand, and they still manage to buy clothes and go on holiday. Every post like this just makes me feel some people's incomes must vastly outstrip their financial management skills!

The ‘cut your cloth’ brigade are ensuring the brain drain out of the country continues alongside people who would have otherwise had two or three children, now only have one.

My kids are at university. When they were born, we didn’t have any of these free hours and had to pay out of our income.

However, I can see how ridiculous the new rules are. How they discourage mainly women from earning more, and can result in less tax income for the UK. Which is in nobody’s interest. And I quite like having a world where there are high-earning women occupying positions of power in medicine, the judiciary, politics, the police, business etc.

People from the ‘cut your cloth’ brigade are either too stupid/uneducated or too resentful/jealous to understand what they are saying. They see five zeros in a salary and lose the capacity for rational thought.

@StrawberrySquash the issue with putting it in your pension though, is that housing costs are so high - people want the money now, to pay their enormous mortgages.

I’m in London and know lots of people in this situation with childcare costs - but also pay £3-4k in monthly mortgage costs for a house that would be seen as utterly unremarkable elsewhere in the country.

That means putting a third of their annual income into a pension for several years is more complicated than ‘at least you’ll have a good pension’ - as they want to be able to afford a family home too.

France? Any Scandinavian country? And that's just the countries I know of but it's probably like that in Italy and other countries as well

A cliff edge is always illogical. It causes perverse incentives like encouraging people not to get promoted. Fine, don't give lots of help to higher earners, but taper these things. Everything around the £100k is badly thought out; it's also where you get the withdrawal of the personal allowance. Just be honest and make that a higher income tax rate. Although at least that is gradual.

The only thing I will say to people saying they can't afford to salary sacrifice is that at their level of income I'd be expecting them to have a way of smoothing longer term income vs expenditure. By which I mean you accept that for a few years income will be lower while you pay childcare/salary sacrifice under £100k. But those big pension contributions now mean you can afford to reduce them slightly in later years, thus recouping the 'lost' money. If it makes sense to shove a ton of money into a pension one year and less the next then I'll do that level of medium term planning. It's still far less stressful thean balancing payday loans to pay your council tax.

It's an illogical policy and it's kept me out of work, or working fewer hours than I'd like. Without the cliff edge we both would have worked more and the extra tax we paid would have covered the additional childcare many times over. But I shan't moan too much, it's a nice problem to have.

Bloody hell. Who is talking about earning millions?!! A million pounds is a number with six zeros after it, so 1,000 000. One hundred thousand pounds is a number with five zeros after it, so 100, 000.

Maybe this is what’s causing all the confusion on here. Are people thinking that one hundred thousand pounds a year is equivalent to one million pounds?!

Gosh whereabouts do you live? I keep trying to think of places my kids could move to when they’re older and where you live sounds wonderful!

The threshold being talked about is £100,000 not £1m. And that’s gross not net. The absolute vast majority of people are not earning £1m net. I think we would all agree that if you have that sort of income you are not going to be disincentivised by paying childcare costs.