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

We did extensive family and financial planning to manage these costs, one of us being a SAHP was not even on the table. I mean 2/3 years of forward planning and forecasting.

our nursery bill is as much as our mortgage, it is so expensive but the end is in sight.

The costs seem very high. I just looked up the nursery mine went to and it's still under £1,500 full time for a baby. That's in inner London so not an inexpensive area.

I imagine you've looked for cheaper options though and they don't exist near you. Obviously if you could find somewhere less expensive it would make a big difference.

I had the same issue and was actually quite stupid and for about a year earned about £5k over the threshold and didn't get the hours, I didn't realise there were means to reduce my salary or that the money between £100k and £120k is effectively taxed so much that I was losing a massive amount of free childcare for almost no gain in income! But at least the fees were more reasonable.

I don’t think you understand the situation at all do you?

If she’s earning 100k she’s paying sufficient tax to subsidise a heck of a lot more than you think. ‘Others’ won’t be subsidising anything for her.

Fascinating thread. I am likely to breach £100k within next couple of years and have been looking into ways to keep income below, likely a SIPP. Never thought of the knock on effect of the money now being out of reach of the taxman. What a ridiculous system.

Do you understand how incentives work, and what the impact of this policy is?

Think beyond ‘that’s a big number’.

It takes a while for the behaviour to develop where everyone starts avoiding the tax. In year 1 the policy would have earned the government money. In the long term the policy costs them a lot of money.

Look at wealth taxes. If a wealth tax was introduced in November it would earn money. But then the wealthy would flee overseas and no overseas workers would come to the UK and in the long term it would cost us a fortune Because even if we say it’s a one off wealth tax, no one believes it.

This it’s not worth it. It’s not worth earning more or working hard because you’re essentially taxed to the max with very little benefits in receipt.

I just checked our local nurssry fees as mine have been out of nursery for about 6 years.
Wow they have gone up so much. £88 a day.
I think we were paying 60 a day. But we didnt have free funded hours at that time so over the duration with 2 kids I think I spent over 100k. It was insane then and it is crazy now.

Are you joking? How is anyone earning over 100k having their childcare subsidised? They are paying HUGE amounts of tax already. If they have nursery aged children they will likely be contributing at this level for the next 20 years.

20 years ago
Childcare costs were huge. But as now they are for limited time.

Get a grip, you're earning more than an enormous % of the population so you reign in your lifestyle like so many others do during the early years ifs.org.uk/tools_and_resources/where_do_you_fit_in

Yes childcare IS expensive but the NMW is £12.21 and hour so thats your £25k spend on a 35 hrs week for one person, let alone the building, support, management, supplies cost of a nursery.

Please explain why there HAS to be a cut off point?

https://www.ippr.org/media-office/a-universal-childcare-guarantee-for-children-up-to-11-would-boost-economy-by-extra-13-billion-a-year-report-finds

The most confusing part is that the Tories were really the architects of this - 14 years and they didn’t move the 62% tax rate, and they introduced the £100k cap for free hours in 2017, and extended the free hours provision (and it’s the 30 free hours from 9 months which has made it really stupid).

Did no one do the calculations? What did they think would happen?

Agree with your point that two people on £99k can claim but one person on 100k can’t and surely it makes sense to do it based on whole household income

i suppose there needs to be a cut off point? Where does it end £150k?, £200k?

I don’t agree with your comment about ‘being punished for trying to do well’. Having a high wage doesn’t automatically mean you have done well and if you don’t then you haven’t. Some people have had such shit lives that them even having a part time job on minimum wage is a extraordinary and trust me they have done WELL

The peasants that don't understand tax will be along to leather you any minute!

It is a fundamentally flawed tax system, littered with cliff edges and disincentives to work. I totally agree, OP.
It perpetuates inequality as it discourages women from re-entering the workforce.
It also makes no sense financially. There are reports showing funding childcare has a net positive financial impact given tax revenues.

And they won’t change this policy as the ‘rebel MPs’ are thick as mince and don’t understand that giving benefits to rich people helps us all.

Because the government are idiotic.

Old days? How long ago are you talking? Do you mean during a time when it was easy for a family to survive on one wage, so if both parents chose to go to work, childcare was actually affordable…?

Completely agree, OP. It’s such a stupid system. Maddening for people caught in this spot.

Making childcare universal isn’t a cost though! The extra tax the government gets in people not piling income into pensions or going part time pays for the extra free child care many times over. And the long term effect of going part time - even temporarily- hits your long term earnings and therefor the long term tax take.

And think of all of the intelligent, productive parents that we are not using as tax raisers. We plough money into making citizens skilled workers because then international companies invest in the UK and we reap the benefits. Yet the government still wants to disincentivise working.

People earning £100k+ pay 50% of income tax. They aren’t being subsidised by anyone else.

I think there’s a generally good question of ‘why do they have to pay in at such a high rate (62% on income at this level), to then be excluded from the benefits they fund for everyone else?

But! I digress. The main rationale in changing it, is that it actively reduces tax take. The penalty is so severe, people are changing their behaviour to earn less, and pay less tax. This is a very big problem when so much of the UK’s tax is paid by this group.

It shouldn’t be possible that you lose tens of thousands of pounds for earning a penny more. The top couple of percent of earners shouldn’t be trying to cut their incomes to claim benefits, because they’re better off. It’s completely bonkers.

I agree that if households can afford it, they should try and view it as a temporary expense. I took the hit and earned less than childcare costs for a bit, to keep my foot in the door, continue pension payments, help work towards a better job, etc, because overall we could afford to. But the astronomical costs mean lots of families can’t, and that pushes lots of women out of work, and we should still be outraged. Access to quality childcare helps to narrow the attainment gap, and it benefits all kids.

I don’t think that many people genuinely think that childcare providers charge too much - we understand that their running costs are high, and the government doesn’t properly fund the ‘free childcare’ places. Rather, the government should be properly subsidising nurseries and childminders so that they can offer affordable, quality childcare, at a reasonable cost to parents. Like they do in other countries, e.g. the Amsterdam example unthread. Nursery workers should be well paid - they have one of the most important jobs! Just not at the expense of stretched, working parents. Childcare in the uk is the most expensive in the world (? Or second most expensive, I forget which) and that’s utter madness.

Expensive childcare pushes willing and able women out of work, and that can trap women in crap/abusive relationships since they don’t have financial independence. It has a negative impact on children from certain socioeconomic backgrounds. It’s ensuring the gender pay gap doesn’t close. I could go on for ages!