AIBU to think the £100k tax trap is unfair?

It's totally illogical. Even ignoring the childcare bit, the total tax % is higher for someone earning say £100k than someone earning £150k. That goes against progressive taxation. But at least earning more means taking home more. Once you add in the childcare cliff you can actually take home less for earning more. It's totally illogical and it's irrelevant that it's hitting people who are well off. I don't earn £10k but I can still see it doesn't make sense.

There are no ‘mental gymnastics’ - these are the decisions people make, when the cost of childcare is so high.

Why are you so averse to the idea people might change how they work, when they work, if they work, how they pay themselves etc due to the high cost of childcare?

Two in nursery could cost you £50k a year - it’s not too difficult to imagine someone might opt to take a ‘career break’ if they aren’t clearing their nursery bill in net income - given they would otherwise be paying to go to work.

A fairer system should also reduce people legally reducing or avoiding tax through things like pension contributions or salary sacrifice schemes. On a separate note I would review these schemes and many other tax exempt or similar schemes as lost potential revenue is also a cost, and is a political choice.

But salary sacrifice doesn’t avoid tax - the tax just becomes payable later, when the person retires and receives their pension. Someone sacrificing heavily into their pension may well be in a position to retire earlier and so end up paying tax on their pension income for longer because they took it earlier too.

Is it not also a question though of whether you’d welcome more tax being paid into the economy? If all these money is going into pensions, it’s not going to tax is it. If the threshold was increased, it would mean these high earners that people are so bitter about would be paying more into the economy rather than their pensions.

There is still limited incentive to only keep 38p in the pound of my salary, it makes more sense to keep under the threshold and retire early. I don't plan to stop the salary sacrifice unless the thresholds change.

Ah so we’ve moved from changing careers to temporary breaks from work or cutting hours now. The mental gymnastics are giving me whiplash.

What about the nurses and police who are stopping work because it’s unaffordable without childcare support, but their partner earns over the threshold?

There will be plenty of (mainly women) in teaching / nursing type roles whose households will be concluding it’s better to stop working or reduce hours because they can’t claim any childcare help.

Do we want that? As it’s happening.

One of my DC works with high earners, many have children. Apparently many manage their working hours and therefore salaries to stay below 100k, to avoid the 'penalties'. It really does not make sense that they need to do this.

I’ve said this about state nurseries ever since the introduction of tax credits caused nursery fees to boom.

Uniforms which have to be washed which was the subject under discussion. With the current shortage of nurses and police officers do we really want them pursuing other careers?

I think there should be a taper or it should be based on household income.

We get no child benefit and no childcare hours, but BIL and SIL, who have the same household income as us, get both. That’s not a fair system.

So having children is a choice and shouldn’t attract tax relief on childcare as a result…. But nursing and police are what, some form of indentured servitude they can’t escape from? Other careers are available.

And I’m pretty sure both of these careers will be given uniforms by the employers…?

Very clever. Try telling that to nurses and police officers. 🙄

It doesn’t make sense

Having a job where you wear a uniform isn’t compulsory…

Financial independence is too important to most of us to throw it away because it negatively affects a minority for a limited period of their lives.

But the only reason they’re doing this is because the tax system has been designed in such a way to exclude ~3% of parents from claiming childcare help.

5 years of wasted energy trying to stay under the cap, working part time, the government losing even more tax revenue due to large pension contributions they wouldn’t have otherwise made…

… what’s the benefit, for anyone?

There is so much talk about growth - and yet we are intensively incentivising our highest earners (who will be paying >50% of all tax) to… work less and avoid paying tax via pension contributions exclusively to allow them to claim childcare help.

Id love to see the numbers to justify it - I’ve seen FOI requests and the treasury don’t seem to have an answer.

Wearing a uniform is compulsory, having children isn’t.

Childcare that is necessary to do your job should be tax deductable. Obviously. If you can claim back washing the uniform you need you should be able to claim back childcare.

It's mad, isn't it? People who are evading the law and fiddling their taxes are the ones who will be having to look over their shoulders all the time and looking for loopholes to find workarounds that aren't really 'in the spirit' of honesty; it shouldn't be something that ever has to remotely concern people who are legitimately earning well and openly and honestly making their fair tax contribution as a result, to have to 'fight back' against the government's grossly unfair rules.

Then you play the long game - 5 years of childcare - after those 5 years when the cost reduces you’re able to take home more.

Regardless of any other reason (which are valid too), it’s ridiculously unreasonable that it has not moved with inflation for donkeys years. Fiscal drag at its finest, disincentivises people to work into opportunities and only incentivising high earners to salary sacrifice so they won’t be worse off, rather than to get the tax back into the economy.

I believe everyone should have a personal allowance no matter what.

Yes, I can't believe that this is up for debate - and I say that as a disabled person who is unable to work enough hours to even earn 5 figures.

If somebody earns over £100K, they're already paying a load more tax than somebody on £20K, so the basic system has worked well, without tugging at the roots to take even more from them as a non-progressive punishment for earning well. Why should they get the TFA? Why shouldn't they?

It's like with the winter fuel allowance, and you get people arguing that mega rich celebrities like Mick Jagger also qualified... so what? He earns an enormous amount of money - which means that he pays an enormous amount of tax, as he should. The more you earn, the less material any free allowance that means something significant to ordinary people actually is to you or to the country in terms of your overall contribution.

Seeking to take basic universal entitlements from people is a slippery slope. What would happen if we said that people earning over a certain amount would no longer be allowed to use the NHS, or to send their children to state schools, on the grounds that 'they earn enough not to need it'? Yes, mega rich people likely choose to go private for these instead; but they shouldn't have the entitlement forcibly removed from them... especially as they are amongst the net contributors paying the lion's share for them in the first place.

Cliff edges are so very obviously a poorly-thought-out, ineffectual, unfair policy that are designed to inhibit growth and to hurt the economy. It's the same with small businesses and VAT registration: even all the honest ones that don't massage their figures and ask for cash to avoid putting extra work through the books are thus strongly incentivised to turn away work and limit their turnover, and thus limit the amount of tax that they pay. Nobody in their right mind is going to want to suddenly have to charge 20% more for every job they do, only to not see a penny of it themselves and to have a lot of ongoing extra admin to do on behalf of the government.

It’s a backwards system and I think the government must have some kind of financial gain to propping the car industry up.

Completely agree , but the government has created a system where the lowest and highest earners are penalised the most by working more. Work extra hours and claiming UC you would only see around 30p in every pound after tax and deductions. high earners lose childcare, CB and pay extortionate tax. The whole thing needs a reform.