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

The answer is not to means test at all IMO.

The answer is a sliding scale, not bands or cliff edge. I don’t believe it would cost more to administer ‘means testing’ when it’s all done electronically.

I totally agree. People insist on saying “earning 100k? Pay for it yourself” without grasping the wider impact on tax revenues.
Nobody at this level is working for nothing. You simply work less (or not at all) and pay more into pensions. It’s ludicrous

It’s not about ‘cutting your cloth’ though is it, it’s about those paying the most tax being very heavily incentivised to pay less tax (either through pensions or working less).

I know lots of people doing both to get below the threshold.

I lose £22k in childcare help by earning over £100k. Let’s say I earn £150k.

So I put £50k in my pension. HMRC immediately lose £26,000 in income tax and NI. They also are now on the hook to pay me £22,000 in childcare.

So the cost of my doing this to the UK is £48,000.

This is completely irrational.

Yes, that’s all very altruistic of you, however high tax band earners are what keeps the country afloat. So whilst no one needs or wants your sympathy, those you help are undoubtedly being propped up by people who meet and exceed their full earning potential. That is what’s is being discussed here, not pension contributions, or other tax dodges.

I do agree with it being ridiculous that 2 people can earn £99k and a single parent will lose the hours if the household total income is £100k. It’s the same with child benefit and also the IHT thresholds, it seems governments dislike single parents.
However, as someone who has brought up 4 children while working in min wage jobs, I struggle to understand how you are struggling, obviously, I am a peasant as a pp puts it.

The biggest issue for me is the unfairness in the system. Two people can each earn nearly £200k, but as soon as one person crosses the £100k threshold, they lose childcare funding.

Especially in London or the South East, the extortionate cost of housing, alongside day to day family expenses like groceries, bills, and running one car means £100k doesn’t go nearly as far as it should.

There are so many costs to grapple with that can upend your monthly budget. A broken boiler, a failed MOT, a burst tyre, dental work or a worn-out mattress giving you a bad back that needs replacing. Add in basic but let’s be real essential costs like swimming lessons, a few clothes for everyone, the occasional haircut, birthday and Christmas gifts for friends and family and there’s very little left over.

For a family of four, £100k pretty much just keeps you afloat and just about out of debt in London or the South East. So even with a decent income, the tax system can make it feel like you’re perpetually treading water financially.

Yes OP. Its stupid. We're in a similar situation. My suggestions would be:

A) Don't think of your base salary. Look at it after pension contributions have been deducted and any other salary sacrifice items.

B) If you have such a scheme available, you can look to get a car through salary sacrifice. Going electric this way can be quite efficient. You're salary will reduce, but your motoring costs overall may not increase too much.

C) Exploit any other salary sacrifice offered through work, bike to work, gym, buy extra holiday entitlement and so on.

D) As mentioned, you can use pension contributions to mop anything up.

E) Ultimately, you could take the financial hit and drop a day. Great fiscal policy mind, a tax and childcare system that encourages you to be less productive. Congratulations, successive governments!! Not.

Exactly this.

Why should net contributors not be able to access services they fund?
Why do you think the should be able to access the nhs / system education / use roads but not childcare?

Why should they exclusively be cash cows to subsidise and fund lifestyles of net recipients without corresponding benefits themselves?

There is if they chuck it in a pension. That's still money, just deferred.

And i volunteer for a charity that supports people who don't have two pennies to rub together. So forgive me if I have limited sympathy for people who can't cut their cloth.

Everything you are saying is true and correct. There is no support for high earning women in this country, we as a group are largely decentivised from meeting our full earning potential, why I’m not sure. My advice is to reduce your hours for the next year at least, however as tax free childcare is available until kids are 11 years old (can be used on holiday camps/nanny’s), the issue doesn’t really change. Tax free childcare should be for all working parents in my opinion.

THERE IS NO EXTRA MONEY IN EARNING OVER £100K FOR THESE PARENTS!

They make a huge loss on any earnings from £100k-£150k. They take home much less money for earning more. The money in the bank goes down for earning more. Do you understand that?

Also double whammy of marginal tax rate. If you creep over 100k it's 60% (or possibly even higher if you've got student loans etc). Completely disincentivises work. I know it's a temporary expense, but it makes my blood boil to think that women (usually) have to pull out of careers they have worked hard for both in the here and now, and also future security of pensions earnings just because the gov want to scrape taxes from frozen thresholds.
My OH is self employed in the creative industries with income that fluctuates but is generally low. However, he is contributing to society and culture, like many other creative freelancers. He basically is a sahd now because we can't afford for him to work (huh?!).

I sympathise. I gave up work completely, that was 20 years ago. No point in working for nothing. We didn't have so much help back then either. DH worked away, big salary, I was therefore taking up all the slack, and working, no CB, no free hours, South East. The effort and stress, and lack of cleared money made no sense to continue.

Either the 30 hours childcare is worth a lot to you - in which case pop the excess over 100k in a pension and claim the hours and be glad you are building a decent pension cushion. Or it isn't, in which case use some of the excess over 100k to fund nursery.

If you are capable of earning over 100k you are capable of managing a budget and cutting your cloth.

There has to be a cut off and this seems quite reasonable to me.

But then when mine were little I was a single mum (in the south east) funding a mortgage and childcare on my own, so I got very good at budgeting.

It's a few short years of belt tightening and then it all pays off.

if you chuck a load in your pension now you will be very glad of it when your children hit the teenage /university years and you have a decent pension cushion behind you

Youre not getting the economics behind this. Say for instance it costs £10,000 a year for the state to provide that nursery place, the person earning over £100k drops their wage to less than £100k, the government pays the £10,000 and the taxman loses out on income tax. Say there is no cliff edge, the taxpayer still pays the £10k and gets the benefit of the income tax receipts.

Our current situation is worse than that though. If someone drops their hours - like in the Welsh situation above - there is nothing to say they will increase their hours after their child leaves nursery. They might get used to part time or their employer might not let them go back up. That’s permanent decline in their earning power and permanent decline in the countries tax take. All because the country doesn’t want to pay childcare for a handful of kids.

Putting in a cliff edge anywhere introduces economic damage somewhere.

If they earn 10 million and pay the appropriate tax, why shouldn't they have access to a universal service they have contributed to. They contribute more to services than I do. It makes them more invested in the system overall and the service itself. Instead of this view that they pay for things and get nothing in return. It would be you pay for things and can access them too.

And if you’re earning over £100k and being taxed at 62% you need to earn a LOT to pay those fees.

Agree with the cliff edge but it sounds like you are earning significantly over £100k if you can't reduce slightly to get under it. I'm in London and we have a joint income of about £140k. We managed it ok. We got nothing until 3 with the first and then 20free h for a bit when it came in with our 2nd. We planned gap between them so they would not need to be in nursery at the same time.

You could definitely afford this unless you have taken out a ridiculously huge mortgage. In which case you should have thought about childcare costs when you applied for it. If this were a post about universal credit we would be saying 'why are you having kids you can't afford'

I also disagree that this is forcing women to be at home. Well, I agree that is happening but that isn't because of childcare costs alone That's because of a societal expectation that they should be the one that does so. In many cases there is no reason other than pride that men couldn't work flexibility or reduce their hours to look after the kids. You should both take the hit.
This has to be part of the solution not just putting kids in nursery all day.

It’s £2500 a month! That’s £30k a year…. That’s obscene

There’s a point where the cost of checking if someone is entitled to something is higher than the cost of the benefit. At the lower end of the cut off (£100k to £150k) the increased tax paid would likely cover the cost of the benefit. Above that, the very low numbers of people affected (people earning over, say, £150k with young children) will be very low, so the admin cost per person will be huge.

An alternative to a cliff edge is a scale of losing the benefit, but again the cost to administer it might be more than the benefit savings

Because there isn’t an indefinite amount of money and honestly if someone on £10 million a year needs help with childcare costs then they are doing something wrong

Having lived in one of the aforementioned countries there is a different attitude to work. Nursery is seen as the best option for the child as it means two parents working full time earning income which is taxed. In this country lots of people simply don’t work. Or only work 16 hours or whatever. Or are SAHMs. Different attitudes in different countries. They see nursery as essential to ensure you maximise the workforce.

The other aspect is the cost of housing. If your housing costs were lower you wouldn’t mind paying more tax to have better public services. Here every penny goes on housing. It’s a terrible way to run a country.

I do wonder if one of our problems is the First Past the Post voting system. If Labour did scrap this policy the Tories would be braying about ‘freebies to the wealthy’ when they know fine well that this is a damaging policy and needs to be scrapped. It would be all over the press. Both parties are well aware of the best changes to make to drive growth and maximise the tax take but they are also well aware that if they introduced these policies they might not be voted in again. This next budget will be really interesting because if you’re going to make big tax changes you need to make them early on in your tenure to give time for voters to forget any unpopular policies.

I do agree with this also, I think these people are buying a house based on their income when they are child free, getting the highest mortgage available to them and there is then no wiggle room later down the line when it comes to childcare.