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

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.

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.

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.

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.

Other benefits are already based on household income. Why not child related benefits.

You are back to front. Its only a snall percentage of highly paid women who are benefitting currently from some things being individually assessed.

I’m in the £100-145k tax bracket and the idea that we shouldn’t have progressive tax systems is ridiculous. All my additional income is discretionary - I can easily cover my outgoings and so it makes sense to tax me at a higher rate than someone struggling. I should be contributing far more.

I’m with pp, it’s annoying, I don’t love it, but I can afford it. The bigger issue is I moved to four days when my kids were little to bring my income down and I’ve never gone back up because when your marginal tax rate is 60-80% it’s not really worth it and I like working 4 days now I’ve got a taste for it. So there’s an ongoing productivity hit which presumably has an economic impact.

But the children are already here: people who exist as members of society, who are of an age where they still need to be looked after. That would be like scrapping free schooling for children and the government retorting to their parents "Well, nobody forced you to have them".

And considering that the taxation and benefit system is all-encompassing for the country as a whole, whilst it's true that having children isn't compulsory for any one individual, it is kind of compulsory for society as a whole, if we don't want to just come to an abrupt stop - or indeed to ensure that those who become too old to work and live independently without there being younger people to do all manner of mundane tasks for them can be looked after.

It makes people like me cut their hours to -
avoid.

basic tax should be £35k

higher rate around £70k

cut off about £125k, with no cliff edge

Yes, absolutely - how have we possibly come to a situation where people are worried about the prospect of earning more money, because that would mean that they no longer have as much money in their pockets/bank accounts to pay for their bills and essentials as they had before?!

It’s this which is the main issue I think. I am a good example of those most affected. I’m a single parent, have earned between £100-120k for the last few years and would have had very high childcare costs without tax free childcare (around £2.5 -£3k a month at points). Even on a net monthly salary of c£5.8 this was unaffordable. I was far better off working 4 days and keeping income under £100k.

Even if you think it’s fair that high earners pay something for childcare and generally pay more tax, the current system is bad for the economy and could easily be redesigned to remove the cliff edge.

I went over the threshold this year due to a substantial redundancy payment so I am currently paying high tax in a minimum wage job as I try to start a new career. Generally I am happy to contribute through my taxes but that definitely stings! Thankfully we're out of the childcare years so don't have loss of childcare funding to deal with on top.

What about elderly care, should that be free too? I paid 100% of my childcare, it's what I signed up for when I had a child and I dont want to pay, via taxes, for other folks childcare now.

Especially because if both parents earn £99k (£189k household) you still get it. But if one earns £100k and the other £20k… you don’t.

How much was your childcare? Full time for one child near me is 1800 a month without the subsidy. At the cheapest nursery.

Although the subsidy is unfair too. It requires both parents to earn at least the equivalent of 16 hours a week at the National Minimum Wage (roughly £131–£204+ per week) to get it.

I am a full time healthcare student. I have a part time job that’s variable hours… at minimum wage. So I may not qualify for the subsidy because I may not earn enough due to my learning and placement (see free NHS work) hours. But someone who works just 4 hours a week making say £50 an hour is eligible. How does that make sense?

£2350 at the cheapest near me, £28k a year.

Most over £2500 now - the most expensive is £2,900. So over £30k a year - after tax!

The cost has really escalated over the last few years.

But if we gave everyone a full personal allowance we’d have MORE MONEY for kids without beds etc.

Wow. Where on earth do you live? Thats more expensive than my area of London

Great for you.

many people earning £100k have very little discretionary income. Most people earning that live in London, where housing is sky high. Throw in childcare and commuting they’re counting every penny. They have to do everything they can to get their salary under £100k as the numbers simply don’t add up otherwise. It’s not as though they’re buying expensive handbags etc!

West London!

Three years ago, the most expensive nursery locally was £2100 and I remember being shocked by that. The cheapest was £1800 or thereabouts.

The £1800 nursery is now £2350. The ‘most expensive’ £2100 nursery in 2023 now is £2550. Most sit around that level.

We have two newish nurseries that charge £2700 and 2900 (the latter a brand with multiple across London).

The costs are spiralling like mad - I guess with the increase in wages, NI, rents etc. And so the lack of free hours is… punishing.

It's incredibly poorly designed. This isn't my area of economics, but it's not something I'd design. The government claim that it's just too difficult to make it fair and it's all about simplicity, but I'm skeptical. I think they do it because it's a sneaky way of getting more revenue. I would design it with a taper at the very least. Personally I think child related benefits should be based on household income, because the current system is tilted against couples with large wage gaps. Typically the lower paid earner is a woman. Meanwhile a couple with the same joint income but an equal split would get free child care.

I don't currently live in the UK so it's not personal grudge. In any case it's not about those poor souls on £100k. It's that it hits this particular narrow band and then sorts itself out, so wealthier people are impacted less. It's hard to justify morally.

Not slow enough as it causes a whopping marginal tax rate of 62% - higher if student loan repayments are also due.

People earning 100k plus have paid enough tax. Everything over the 100k should be tax-free.

People I know have reduced their hours to be able to keep within the child care funding limits. Seems that three days per week is optimal (30 hours per week for 38 weeks per year) may have to pay a small amount which for many nurseries will include food and nappies.
The added bonus is being able to have time with children while they are young and maybe time to pursue own interests, get the house in sensible order even have some quality time with DP if both at home.
Yes the career slows down but eventually most children are independent to a degree.

Tbh, I think all the frozen tax thresholds are unfair and far too low given the cost of living increase. However, people these days expect that the state should pay for everything, so what is the solution? 🤷🏻‍♀️