To be pissed off at the new tax free childcare

[childcarechallenge]

NC for this.

We have two DC in childcare and live in London. I'm starting a new job next month and my salary is 48K, after tax, student loan, childcare costs and tube to work plus a few other generally working expenses (clothes etc) I've worked out that I will take home less than £200 a month.

DH earns a good salary which is good because we almost completely rely on his salary for rent, bills etc. He just received a large bonus which pushes him over 100K which is the new limit for the new tax free childcare scheme from the government.

Essentially, between 100K and 120K after tax, student loan, the loss of his "tax free allowance" which is clawed back over 100K, and the fact that we will not be able to claim £4000 back on our childcare because he is no longer under 100K (This applies to BOTH of us because of his salary) means that of that £20K we are actually only £1800 better off. AIBU to think that this is complete robbery - DH works extremely hard, very long hours (sometimes 70 hour weeks) in a high stress environment and the government seem to take an obscene amount of his salary.

We have an opportunity coming up to move to a lower tax country in a year or so with his job and this just makes me really want to take it, AIBU?

personally i think the govt making SSP payable by the employer was a bad move for people having nannies. It applied to all small businesses. And you can't use childcare vouchers for nannies unless they're ofsted registered which a lot aren't.

That said, the government has a ticking demographic bomb in terms of dependency ratios if they don't ensure the uptake in private pensions is higher.

I fully expect that by the time I am retiring I won't qualify for the state pension as it is totally unfeasible for the government to afford this.

They delay in retirement age that the government has currently announced will only help keep the ratio of workers to pensioners stable (actually decreasing slightly) until 2020. By 2035 we will be looking at 2 workers for every pensioner, which is a scary prospect, and it will keep increasing unless the age to qualify for state pension increases with life expectancy.

This is an unrealistic prospect due to the fact that "healthy" life expectancy (where people have live without a carer) only increases 1 year for every 3 years of increased life expectancy.

Basically, in one emoji. 💩

But you are choosing to pay your landlord a ridiculous sum of money each month. It has been pointed out that you could move elsewhere and save yourself a tidy sum.

also (small violin playing here) my DH's lovely pension scheme has been watered down several times after him joining it so that he's now £10k pa worse off in eventual retirement income than he was when he was on a much lower salary 5 years ago! My private sector pension is also not looking great which is why LISA seems a good move for those of us now starting to find pensions exciting as we push 40.

Gosh so many nasty people on here. You think earning more money you should get less off the government? No! You earn more money and you pay more to the GOV anyway! Unacceptable if they don't give you the childcare benefits

Yes the loss of the personal allowance means that £100k.to £120k is taxed at 60%.

After 120k you are taxed at 40% again so it does seem.a bit unfair.

I sympathise but you won't get any sympathy on here!!

I don't want to say where we both work, but it's really not that possible. Even if we moved somewhere completely disregarding DH commute.. it's really not that easy to get to my work from anywhere remotely far out. And if we could find somewhere we're talking about saving 200£ maybe even 300£ a month if it was really far out.

If my aim is to save as much money as possible then the best bet is to go abroad which would save >10 times the amount each year - not even accounting for expat benefits such as housing allowances and then increased salary for DH as his career develops.

Ah yes fakenews in that case LISA would seem appealing, for me it's just too many years away and I have other saving priorities. The tax benefit and the fact my employer will match pension contributions has meant that a traditional pension has been the best way for me to save. DH employers also make non-contrib contributions so it's a bit of a non decision for us. Although he will need to be careful - I don't know if you missed this but last year the government took away the 40K tax free pension allowance for high earners. This is however done on a sliding scale, not cliff edge. And doesn't impact us yet, it starts to taper away at 150k income.

It's a fairly harsh system because nobody in their right minds would invest in a pension above the tax free limit. Why would you pay 45% tax to pay into a pension, and then pay income tax again when you receive it!? But the LISA will probably be where the money ends up instead.

The benefit for the government being that they get the income tax NOW not later when these people retire, and at a higher rate: 45% as opposed to the 20 or 40 they might pay on a pension.

I haven't read the whole thread as I can imagine a lot of the responses but I'm with you OP. Why should you be penalised for working hard to get where you are. The fact you only get £1800 out of 20k is absurd!

And don't even get me started on the higher tax rate for higher earners. DP is a higher earner and is taxed 40 p for every £1 he earns. Even if we were all taxed 20% he'd still be paying a hell of a lot more tax than the average Joe. I don't understand this whole penalising the people who have worked harder

I don't understand this whole penalising the people who have worked harder

Well maybe you should RTFT then because earning more does not always equal working harder FFS!

of that £20K we are actually only £1800 better off

I can see that's irritating. But:

1. You're vastly better off than most people. And although that probably wouldn't have happened without hard work, there are many of work as hard and will never have anywhere near that kind of wealth.

2. The dramatic difference here is only because of taxpayers paying for childcare for other people's children. That's very different from only getting £1800 out of a £20,000 increase in income owing to punitive levels of income tax.

I think it's right that we all pay taxes to provide for what we all need collectively, and for what less well-off people and families need individually. And I think it's a wiser use of tax-payers' money that benefits/free childcare etc. are means tested.

I can see why it's irritating, but perhaps you could practise some gratitude for what you have, and the country in which we live.

There really is no point earning more than £50k in this country due to the obscene tax. Happiness indexes also say that happiness doesn't improve after £50k anyway!

And don't even get me started on the higher tax rate for higher earners. DP is a higher earner and is taxed 40 p for every £1 he earns. Even if we were all taxed 20% he'd still be paying a hell of a lot more tax than the average Joe. I don't understand this whole penalising the people who have worked harder angry

For a while I was lucky enough to fall into the higher rate band. I didn't mind. Taxes are necessary in a compassionate, civilized country, and it's right for those with more to pay more.

A few years ago I gave up my well-paid job to care for my mother, after she was diagnosed with a terminal and degenerative neurological disease. I've therefore only been able to work part time. But whilst caring for her, I definitely worked a lot harder and for longer hours than I used to when I was a high(er) earner.

You don't seem to understand that you are lucky as well as hard-working, and that there are others who are less lucky and just as hard-working.

OP I have a somewhat libertarian view.

Tax is theft from the government. There should be no general taxes. If the government needs to pay for parks, NHS etc you pay a "use fee"

That way you pay for what services you use.

Import taxes etc should pay for the military etc, not the individual.

Surely a "use fee" is a form of tax? Who pays the use fees for people without money?

A use fee would be a ticket, or a charge for the services.

People would have more money and be able to pay for what they need.

Not rtft but how about he turns down the bonus? Then you still get your tax free childcare.
I am not pissed off at tax free childcare, earning 38k between us in jobs which dont offer childcare vouchers this scheme is going to save us over £150 a month - our entire monthly food budget. (Just for some perspective)

So you would expand the welfare state?

DP is a higher earner and is taxed 40 p for every £1 he earns no he isn't. He is taxed 40p on every £1 he earns OVER the 40k threshold.

Childcare have you considered shared ownership?

Don't need to pay a massive deposit as you would traditionally, and your monthly mortgage/rent payments are likely to be at least 20% lower than renting privately.

"People would have more money, and be able to pay for what they need"

Except for those that couldn't afford the price.

Not to mention services some people might not value but have benefit to civilised society as a whole.

I can't go in as I feel my blood pressure rising...

No welfare state wouldn't be expanded?

Some services would stop as they don't get the funding they need, or they would adapt and become a service they people do use

You have my sympathy, OP. I think it is outrageous that the legitimate expenses of working in a graduate job should eat up the whole of your salary. There needs to be a mechanism to prevent this happening - it's a human rights issue as well as an economic issue.

Haha goodness I'm not complaining about the tax he pays on 0-100 just the cliff edge, that to me at least, seems to incentivise the wrong things. I understand that to pay for services some will pay more than others.

Excluding the bonus (and for the moment ignoring the childcare and student loan) DH pays ~35k income tax and national insurance on a 100k salary. Another ~12.5k income tax and national insurance comes out of the 20k bonus because of the tax free allowance dissapearing. Feels excessive.

Then the non eligibility of the 4K childcare tax break and the 30 hours for 3&4 year olds is just an extra little kicker. Especially when it doesn't consider my salary. A couple earning more, both on 99k would not be impacted. DH salary only impacts me when it is assessing our non-eligibility but we are not able to share tax allowances etc, seems an odd way to structure things.

I know we are way off this, but for child benefit there is a similar system. One high earner is all you need when really it should be the couples income as a whole. I appreciate that people earning around the 50-60 mark rarely fill out tax returns so it becomes complicated. But everyone over 100k has to fill out a tax return. That's presumably the real reason why it's the cut off for everything, it's easy to check.