The madness of the £100,000 childcare tax trap

[MidnightPatrol]

An interesting article in the FT today about the impact of the current and new childcare schemes on people earning £100,000, which is often mentioned here.

You can read it here

"From September, a parent in London with two children at nursery who passed £100,000 of earnings would need to earn more than £149,000 to compensate for the loss of childcare support from the state, according to new calculations by the Institute for Fiscal Studies — a pay rise of almost 50 per cent."

Exactly. I am a former family law solicitor who practiced in a fairly rural high street firm. My boss who had 30 years of experience was paid £54 k. I was paid a very great deal less than that. It's a myth that all solicitors are rolling in it.

My very good boss then became a Deputy District Judge and he was so bowled over by the salary (£115k) that he was 'You won't believe what I am going to be paid!'. We just told him he clearly needed to get himself a nicer car than his fairly ancient golf!

@Kitte321 but I agree with you that these cliff edges and the way high earners are discouraged from working full time or just offsetting into pensions, understandably, is wrong! As I said upthread - although perhaps not so eloquently as a 100k plus person could - is that as a basic rate tax payer all my life, I think higher band earners should still get well subsidised childcare, not have to face these mad cliff edges, etc. We should all benefit as a society from our taxes and childcare is something I think should be like some other countries and be cheap, subsidised, available for all. And I don’t even have kids but still think this would be good for society.

Your self assessment will supersede all of that. Just make sure you register for it, I'm sure the window closes some point in the summer.

If you owe money you can make a one off payment or ask for your tax code to be changed, as long as it is (I think) under £3k you owe.

You're right sorry, I was thinking of this thread where the poster is on £260k and complaining!

https://www.mumsnet.com/talk/amibeingunreasonable/5299373-avoiding-the-childcare-trap

Given the titles are very similar and posted within a few hours of each other I am wondering if one or both are troll threads.

That makes sense, thank you for taking the time to explain.

This whole thing is stacked completely unfairly towards women and their advancement of their careers. As soon as the man hits 100k and child care assistance is lost - it always falls onto the women's shoulders to make sacrifices to her own career. I am shocked with some of the comments here. Where is the solidarity? I happy pay 40% as PAYE even though I own the business and can be self employed and dont do those funny things my friends in the same position do to legally avoid paying 40%. I dont because I believe in paying into society and ensuring people who need it get it. Come on - where does the money come from to pay for PIP, UC, Unemployment, Disability? It all comes from those who have been shafted and have to hear people go on about how 'lucky' we are. Trust me - when the mess kicks in and it will and UC and Childcare is cut for all, who is going to speak up then? We are sleepwalking into UK skills Brain Drain and dont even realise it.

What about this thread, makes you think it’s a troll thread?

The OP includes a link to an article in the Financial Times, which has been written off the back of a study by the IFS, analysing the impact of the new childcare support. That was published on Thursday, in the newspaper.

If you earn 100k each or between then surely you don't need help with childcare costs., especially if you can afford to live in London(though who would actually want to? (Certainly not native brits).I think it's about time high earners are also hit, and made to suffer, why should anyone earning this amount expect hand outs? Everyone quick to attack
Those on benefits, asking for hand outs, including disabled(I mean who can live on just over£300 a month? ) Now you can see maybe there is a reason, that many cannot work .And many of you claim it's a lifestyle choice)

Do you know how many people that cannot afford a mortgage,or live in their own towns, or get Jobs, never mind one that pays £100k a year. Those not earning £100k cannot afford childcare costs full stop and have to rely on family members to help, or on state benefits

The point is more around the cliff edge and the impact it has

the government could get rid of the cliff edges in the system and still have the same (or even more!) tax take while encouraging growth

once tax rate is over 50% it has a massive disincentive effect

I ask again, how does the existence of the 100k trap benefit those of us who earn less than that?

If you have one earner in the house on / around 100K, you're actually taking home net pay of approx £5,700 a month, and that's not factoring in pension, student loans etc.

if you have a kid that needs FT nursery, you're looking in the region of £2k a month for fees, and then mortgage, bills, commute costs, pension and all the rest. If you've got 2 kids who need FT nursery you've basically blown through most of your monthly income just on that.

Due to losing personal allowances etc, 100k doesn't give you as much net income as people think

Do you not think that this is because people are already reducing their income via increased pension contributions or working PT to avoid the cliff edge? I wonder how many earn £95,000 to £99,999?

I fear this is going to be like trying to have a sensible conversation with my cat, but I’ll give it a go - do you understand that this is not about the absolute levels of taxation paid by those earnings six figures (though that’s worthy of a thread in itself) and nor is it about whether they should or shouldn’t get free or subsidised childcare (though anyone with half a brain can clearly see it should be universal)? It’s about the principle that work should always pay - same as it should when we’re talking about the interaction of wages and benefits at the other end of the spectrum.

The cliff edge means that for many workers earning between £100k and £150k work simply doesn’t pay at the moment. It does the opposite. That’s obviously daft and bad for ALL of us because the people in question are net contributors and we’d all be better off if they worked and therefore contributed even more than they already do.

It seems difficult to get this through to some posters on this thread for some reason. Perhaps because you’re too caught up in your weird “bite the hand that feeds you” hatred of people who are earning well and paying a lot of tax into the system.

but I get a lot of sense out of my cat
apologies Indigo, I couldn’t resist 😆

Everyone should get 30 free h. Childcare should be considered infrastructure not a luxury.

@Middleagedstriker you're incorrect. Over 4% earn over £100k - that's 2.7 million people. I already posted about the impact of only some of those people redirecting their income. It could be at the £1bn mark the government could be losing in tax receipts due to the cliff edge. Also this problem includes men earning over £100k with kids, not just women... Don't understand why you limited your calculations to women?

That's a problem for everyone. I suggest you read through the full thread to fully understand why it doesn't just affect the individuals involved.

I think it’s disgusting that two households earning the same amount are taxed so differently and come out with such different amounts. It absolutely should not matter how a family earn their money whether it’s from one earner or two they should tax it as a combined amount for those married. For lots (like us) it’s not a choice for one person to pursue the career whilst the other stays home. I was forced out of work when one of our children was severely disabled and high needs. Yet here we are losing way way more in tax each month than if our income were made up of of two salaries rather than one.

I know I'm exasperated as well 🤦🏻‍♀️.

Lots of people weighing in with no clue on the about the subject, other than "rich people shouldn't get benefits!!"

Agree
Households shouldn’t be treated so differently
but I do not agree with ‘tax it as a combined amount for those married’. What about the non married parents. Why only if parents are married!

Dont know why you are quoting my post. I was agreeing with the post that tried to point out that not all solicitors are on mega bucks.

Frankly if you’ve worked hard and pay your taxes, get up everyday, juggle family life you expect a certain standard of living

I'm genuinely interested in these conversations, and want to educate myself.
The income levels that are being referenced here are completely alien to me - as I'm a care worker on minimum wage.

I just get slightly frustrated when I hear people say that they've "worked hard/paid taxes/get up every day/juggle family life"?

Minimum wage workers do that too?
I work extremely long hours, leaving my house at 06.30 and getting home at 23.00, five days a week.
My actual rate of pay is less than NMW, but domiciliary care gets out that loophole.

I work hard, I pay my taxes, I get up every day, and I have always juggled family life.

I adore my job, looking after elderly people at home, and I wouldn't change it for the world!
I'm not envious of high earners - I know you will have your own huge pressures at work.

I just don't like the narrative that only high earners are putting in the hard work?
We are too.

@DontWheeshtMe
I think in order to be taxed together there needs to be a legally binding agreement between two adults to function as a financial team and be financially liable for/accountable to each other. I don’t think it needs to be ‘marriage’ but I equally don’t think you can go around just taxing people who cohabit without any legal agreement together either as that could get incredibly messy. Ideally there would be something in place that offered the legal protection of marriage without the societal connotations, alongside of course traditional marriage!

Civil partnership?

Or just treat everyone as an individual. Like our personal income tax works.