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

I do think there has been at best a lack of regard to which sex will be most impacted here. High earning male partners are not obliged to share their earnings and whilst this thread refers to couples tax planning together as a team, that doesn’t always happen.

See also the high income child benefit cap. This was a benefit designed to “take from the wallet and give to the purse”. A male partner earns over the threshold and (generally) the mother loses it. This is particularly impactful for single parents, the vast majority of which are women, who then lose child benefit on a single salary.

I remember when UC was brought in there was a lot of unease that the claim would be a family claim rather than individual and that this might exacerbate financial abuse.

dropping his hours is the other option.

If one of you is on £100K whilst your children are under 5/4 you are in a great financial position and have a long wealthy life ahead of you

You can put up to £60k into a pension to bring the earnings under the threshold.

If you are earning over £160k whilst your children are under school age then you can put a bit less in your pension to cover the few years of childcare costs and still bring home a fantastic wage, plus the other parent's wage because you wouldn't need childcare then.

At some point you have to ask the question how much do you need?

Right now I don't think the country's payments need to be supporting people in this sort of financial position.

Someone upthread said it was Jeremy Hunt who introduced this. Whatever else I may think of that man I don’t consider him to be unintelligent.

I don’t think there should be a cliff edge on this or on income tax, it should be proportionate to salary. The computer systems are able to handle all this, it’s not like it is all calculated manually in this day and age. It should also be per household salary.

Why did they remove the childcare vouchers system?

I agree and other European countries have much cheaper childcare. But this is because it is heavily subsidised and paid for by higher taxes - particularly income tax and often VAT. But people in the UK seem to have some primal fear of raising taxes and refuse to consider paying more tax so we’re stuck in this conundrum.

YANBU.
I won’t believe a government ‘cares about women’ until childcare is heavily subsidised for everyone; and I mean heavily subsidised to the level it is affordable- and the CMS is completely overhauled.
I agree it’s all about reducing choices for women.

Side note but in keeping with the women’s choices & societal support part - Can you imagine what life is like for single mothers without family support? I literally don’t know how single mothers of young children manage

No it isn't. It is forcing couples to look at how they manage the situation they are in. There is no reason the SAHP needs to be mum and society will be a lot better off once this stops being the presumption. There are also other options I work for local government and many of the male staff work 4 days a week and their partners also work 4 days reducing the number of nursery days to 3. Often this is compressed hours rather than dropping a day so still the same salary. With WFT this is a much more accessible option.

I think many people just see 100k and think "its massive, how can they spend all that?" Without actually stopping to think through implications.

It is a massive salary but very easy to spend in major cities where just a normal 2or3 bed house or flat costs more than half a million minimum, plus not seeing how much goes on tax each year.

The threshold is ridiculous.

It makes no sense to push people to earn less so they are better off.

It doesn't affect me, neither of us earn that much. I also got the 15 hours at 3 and childcare was expensive then too, but the tax system didn't make me better off on a lower salary and this tax threshold is damaging the economy.

In Wales it’s based on gross income so there isn’t even the option of paying extra into pension or salary sacrifice schemes to bring income under £100k. My husband‘s earnings have just tipped very slightly over the threshold as a result of doctor pay rises and we are so much worse off now.

I think this is the crux of the issue - the number of people it impacted was so small when the policy was made.

I have no skin in the game any more but yes I agree. This is one of the more stupid ways a government could subsidise childcare and calling it "free" was even more stupid. As was low balling the hourly rate expecting it to fall to that while simultaneously following policies that have increased wages significantly at the lower end, employment taxes, business rates...

I don't know why the subsidy can't go to the parents directly via the tax system (we have examples of that already within Universal Credit, and the "tax free childcare", plus the childcare vouchers that preceded them).

Producer subsidies always have perverse effects. Any Economics student could tell you that.

It is rubbish and at the time £100k was brought in, far fewer people were caught in this and the cost of living / inflation was a lot lot lower.
We’re dumping into pension to avoid it however we are fortunate in that our childcare needs are long gone.

Virtually every other poster in this thread is missing the fundamental point of how economically damaging this policy is both to the parent and the UK. Sigh! This is why we cannot have good taxes in this country.

And the other side of things - the quality of our childcare seems poor, again down to gov't funding. Disinterested (cheap) apprentices, wages that would be higher at Lidl. It's a government decision that devalues Early Years.

These reasons seem like a bit of a nonsense when you look at our childcare costs versus literally every other country in Europe with the exception of Switzerland. It is a government decision, and a poor one.

OP - yes, it is shit. Sincerely, mum of preschooler twins.

I don't disagree with this but there's so much venom directed at public sector employees and calls for their T&C's and pensions to be downgraded, expanding that sector to include childcare workers would not go down well. The only way full subsidized childcare would happen would be at huge expense and at a basic minimum standard. Private businesses would operate as an alternative and you get a two tier system just like schools with cries of inequality and unequal playing fields. I don't know how it does work in other countries but given the "feel" in the UK right now, I can't see it happening here.

Another poster not understanding the current situation.

Due to tax and loss of benefits with two in nursery now, I need to earn £150k to have the same net result as earning £99k.

If I earn less than £150k… I actually have a lower net income after tax and benefits, than on £99k.

This isn’t ‘oooh yes but it’s always been hard’ - there’s an income threshold at which unless you earn dramatically more, you are financially worse off. This means people are heavily incentivised to earn less - that is a huge productivity issue (and means the country raises less tax as a result).

A few reasons why childcare costs are inflated. Ratios in the UK mean childcare workers look after far fewer kids than other comparative countries. Running costs, energy being the big one. We have some of the most expensive energy in the world. The way funding is structured means that people who get the most support with childcare and pay nothing push up the price for everybody else, especially those who have to pay full whack. The only solution if you're a high earner is careful birth spacing (putting multiples aside), or taking a massive salary hit with self sacrifice schemes, someone dropping their hours or quitting altogether. There's no way around it

It has changed over the years. My dc are of the age when you used to get 15 hours free the term after they turned 3. So if you had a summer born they were at school before long. We were classed as middle earners I guess but I couldn’t afford to work as my wage would be gone on childcare. I worked around dh in minimum wage roles. There was a recession and we ended up in a lot of debt. I think the only sensible solution looking back is to have bigger age gaps. But there is no perfect solution. I wonder if we are lucky the government pay towards childcare at all. But it doesn’t benefit everyone and never has.

A temporary expense that potentially goes on fora decade if you have more than one child.

It’s amazing how many people engage in this topic saying it’s fine and just how it is, ‘childcare has always been expensive etc’ - with absolutely no grasp whatsoever of what the issue is for people earning over the childcare threshold.

My immediate loss of benefits for earning 1p over £100k is currently £22,000. To take home £22,000 after tax over £100k, I need to earn an EXTRA £50,000.

That creates a massive incentive to ensure I can claim the free hours - by working part time, by using pension contributions etc. Otherwise I get paid £0 for a third of the year.

It has not ‘always been this way’ - the 30 free hours policy from 9 months (which is the real distorter) was introduced LAST MONTH.

@mustytrusty and @Cantseetreesforthewood above, this may help your understanding of the situation posters are describing.

There would be a short term gain to this policy. It took time for people to rearrange their tax affairs to regain the childcare hours but it happened eventually and the policy went from on that earned the government money to one that costs the government money. The government are well aware it’s a stupid policy which is bad for the economy but they are also well aware that quite a lot of the public aren’t intelligent enough to know that rolling back this policy isn’t a giveaway to the wealthy but to help grow the UK economy. Taking action to benefit the UK economy like this will damage them in the polls so they won’t do it.