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Tax Free Childcare - losing eligibility over £100,000

61 replies

123456kent · 26/11/2022 10:50

Hello,
My husband earns very near the £100,000 mark, and so in March we’d expect him to lose our eligibility for TFC and 30 Free Hours once he has a bonus/salary increase. Has anyone confirmed they are no longer eligible on the website? What happens? Do they take back any of their top ups? If we were to maximise on building up this account between now and then (to earn the maximum amount of top up) will it be stripped off us as soon as we say we are no longer eligible? Thanks

OP posts:
Are your children’s vaccines up to date?
theholidaymum · 01/01/2023 20:34

Just to clarify that 30 hours “free” isn’t really free if both parents workings full time - in order to qualify both needed to work. We still will pay £1100 per month to top up outside of school hours and food/expenses we still need to pay.
my point is if the parents are already in benefits and not working, it’s better to get free food vouchers or some sort rather than asking for extra hours “free childcare “ which will end up costing them more. Unless the government will agree to pay a fair price for “free hours”, which I don’t see happening.
so many nurseries or childcare settings are closing down near us because of it. While we still pay a ridiculous amount of childcare fees just because of shortage of options.

Confitofduckand · 01/01/2023 20:06

It is astonishingly unfair when you look at the other side of it.

A child living in poverty is eligible for 15 hours free childcare from the age of 2.

When they turn three, their richer peer gets 30 hours free childcare, but the child living in poverty still gets only 15 hours.

I posted on this a while ago on MN and was really shocked that so many agreed with the system because of the argument that non-working parents don’t need childcare. The reason those children are offered 15 hours at the age of two is to close the attainment gap that correlates so closely with poverty in the UK (and elsewhere) - it is quite difficult to get a job that fits inside 15 hours of childcare, so it doesn’t serve all that effectively as a ‘back to work’ scheme.

I had posted because, as a governor in a nursery, a child on a child protection plan (at significant risk of abuse), was not eligible for more than 15 hours. A social services case worker could have awarded 30 hours, apparently, but that wasn’t happening. Their wealthier peer, however, got 30 hours and a (paid for by parents, but inexpensive) hot meal (As governors, we had a policy that we would use the school’s budget to fund free school meals for the children whose parents earned below the FSM threshold in a primary school setting, but because the children from lower income backgrounds were only in for 3 hours a day, they missed the chance of getting the funded lunch). Even worse, during Covid, the 15 hour children were ‘bubbled’ in one room and the 30 hour children were put in another, so we had segregation by parental income.

I was chastened to learn from that MN thread that I started (… and from the board of governors on which I was sitting), that this is not considered unfair by many and is not the cause of the moral outrage that I had thought it would be.

Not much of a solution for OP, but it is my opinion that the highest income threshold on this scheme is generous (and that it is the poorest who should be funded 30 hours).

theholidaymum · 01/01/2023 19:28

that's what will happen to my husband's bonus. We will out all the bonus into pension until DS goes to school. It just isn't worth it to loose all the benefits and paying 60% tax at the same time.

iknowwheretheothersockgoes · 13/12/2022 14:48

UnicornRidge · 13/12/2022 13:49

Single parent family. Can't assume everyone on £100k have a stay at home spouse.

I think there's an assumption that single parents can't also be high earners 🙄

UnicornRidge · 13/12/2022 13:49

Single parent family. Can't assume everyone on £100k have a stay at home spouse.

Janieread · 13/12/2022 08:30

Frapped · 13/12/2022 08:29

Posting goady threads on MN

😂

Frapped · 13/12/2022 08:29

Janieread · 13/12/2022 08:29

What's the other parent doing all day while the child is in nursery? Can't they get a job if 100k is such a struggle?

Posting goady threads on MN

Janieread · 13/12/2022 08:29

UnicornRidge · 13/12/2022 03:45

Politicians pit people against each other.
£100k is not rich in London. There is not much left after paying rent, bills and childcare. £2.5k rent, £0.5k bills, £2k nursery.

You should direct your anger at billionaires and tax-dodging multi-national like Amazon and Starbucks.

What's the other parent doing all day while the child is in nursery? Can't they get a job if 100k is such a struggle?

Frapped · 13/12/2022 08:28

UnicornRidge · 13/12/2022 03:45

Politicians pit people against each other.
£100k is not rich in London. There is not much left after paying rent, bills and childcare. £2.5k rent, £0.5k bills, £2k nursery.

You should direct your anger at billionaires and tax-dodging multi-national like Amazon and Starbucks.

This is a two person family though. Either one is a stay at home parent and don't need 30 free hours or they're both earning and actually earn more than a 100,000 which is is hardly breadline (even in London!)

Janieread · 13/12/2022 08:25

user1497787065 · 28/11/2022 00:03

So parents earning almost 200k annually still get 30 hours free childcare? Complete madness.

I appreciate that childcare is expensive and when I had my children there was no government funded childcare but cannot accept that the taxpayer funds childcare at that level of salary.

I totally agree. That's crazy.

thetulipsarelookinglovely · 13/12/2022 08:23

I would increase pension contributions to account for any bonus and salary increase so he ends up with the same adjusted amount. They base it off of gross salary minus pension contributions (the adjusted amount).

Completely agree with @Walrus6. Paying so much tax whilst being cut off from benefits like childcare help is really grating. Especially as we know couples with a higher net joint income who can still claim.

Walrus6 · 13/12/2022 08:03

NewNovember · 13/12/2022 03:33

Or maybe accept that as high earners we should pay for our own childcare. I would be embarrassed to use a legal loophole when people are struggling to keep warm. Our taxes are needed for those earning much less.

Using that logic, should higher earners be allowed an NHS GP? Or to send their children to state school?

What seems unfair to me is a system which results in some people contributing more in tax (due to their higher income) yet be prevented from benefiting from it (childcare).

There’s no tapering so as soon as you go over the threshold you lose your Tax Free Childcare and the 30 hours for 3 year olds (you only get 15). Those two things combined are worth about £5.5k for just one pre-schooler in nursery and so you can be in a situation whereby you’re paying proportionately more tax than anyone else as you lose your personal allowance and then are hit with losing your childcare funding. I’ve suggested my OH go part time which would result in him paying less tax (so less available to pay for others) and getting the childcare back. It shouldn’t have to be this way.

UnicornRidge · 13/12/2022 03:45

NewNovember · 13/12/2022 03:33

Or maybe accept that as high earners we should pay for our own childcare. I would be embarrassed to use a legal loophole when people are struggling to keep warm. Our taxes are needed for those earning much less.

Politicians pit people against each other.
£100k is not rich in London. There is not much left after paying rent, bills and childcare. £2.5k rent, £0.5k bills, £2k nursery.

You should direct your anger at billionaires and tax-dodging multi-national like Amazon and Starbucks.

ArcticSkewer · 13/12/2022 03:37

@NewNovember in that case, you could donate to charity instead? That lowers your income (and you get tax back) but you get to choose the way your money is spent.

NewNovember · 13/12/2022 03:33

UnicornRidge · 13/12/2022 03:26

You can put everything over £100k into a pension. The annual limit is £40k www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates

Or maybe accept that as high earners we should pay for our own childcare. I would be embarrassed to use a legal loophole when people are struggling to keep warm. Our taxes are needed for those earning much less.

UnicornRidge · 13/12/2022 03:26

You can put everything over £100k into a pension. The annual limit is £40k www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates

IceCreamWoes · 01/12/2022 06:20

He can chuck the extra in a pension and then it doesn't count towards the 100k threshold

emeraldcity2000 · 29/11/2022 11:41

If he will only just be over on salary then you can salary sacrifice into pension - either salary or bonus can be sacrificed and allow you to remain below the limit. Bear in mind the marginal rate of tax for anything between 100 and 125k is 60pc (because of the way the personal allowance tapers) so it's generally a sensible move.

iknowwheretheothersockgoes · 29/11/2022 11:35

Love the oven update!

nannynick · 29/11/2022 11:24

There is a grace period. So what you have been told by the helpline seems right.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachmentdata/file/1027881/Earlyyyearsentitlements-operationallguidance33.pdf

Tax Free Childcare - losing eligibility over £100,000
123456kent · 28/11/2022 22:50

But if the salary increase tips him over £100k anyway then that will be a futile move won’t it?
Also need to weigh up which has more benefit - taking the bonus and making overpayment on mortgage, or put the bonus into pension and keep the TFC/30 free hours…

OP posts:
PurplePansy05 · 28/11/2022 21:59

OP if he is likely to receive the bonus anyway then get him to increase his pension contributions by way of salary sacrifice, would this work? Work it out so that when he receives the bonus the total figure will remain under £100k pa if you can and job done, you will remain eligible to claim everything, you won't feel worse off and he will invest more into the pension.

123456kent · 28/11/2022 14:55

I just called TFC helpline. She advised that there is a grace period once we confirm we aren’t eligible, and in that period we’d still earn it. But then after that the money you have received from govt as a top up ‘just disapears’
So, in answer to my original query, it would absolutely not be worth us building up the account to earn the maximum top up from them before it’s stripped from us.
i’m not 100% convinced that she was 100% convinced on the answer she was giving me…. It felt a bit like a fob off!

OP posts:
123456kent · 28/11/2022 14:52

@plinkypots that is an option, for the bonus… if salary sacrifice is available for bonuses. But it’s not an option for salary increase is it?
yes it’s over £100k for one person, not both. Which is extremely frustrating.

OP posts:
happyfishcoco · 28/11/2022 00:28

user1497787065 · 28/11/2022 00:03

So parents earning almost 200k annually still get 30 hours free childcare? Complete madness.

I appreciate that childcare is expensive and when I had my children there was no government funded childcare but cannot accept that the taxpayer funds childcare at that level of salary.

yes, if both parents earn 99K,
£5,419 x 2 = £10838 take home per month, still can get 30 hours free childcare AND TFC.

and if just one parent earns over 100K,
£5,467 per month take home, they will lose 30 hours free childcare.

really unfair.