to think it's bonkers but also not to turn down this pay rise

[fortunatefamiliar]

Name changed as I will likely get flamed.

DH and I have a very good household income, I am not denying that. DH is in a sector which pays well and thankfully has not seen a covid-related downturn. (I'm public sector but in a good job).

He was due a payrise in April but they deferred them due to covid, very understandable. As it happens their sector has been largely unhit and so payrises are now being discussed. DH has been offered a very large payrise as during COVID he did a really big piece of work which has saved the company hundreds of thousands over the next few years (company has a multimillion pound turn over) - he came up with the idea, in his own time did a demo to show it could work and then supported his team to get it up and running. He definitely deserves the payrise.

BUT

if he takes it it, it means we will no longer be eligible for DSs 30 free hours and DD won't get hers next year when she becomes eligible. After tax, the payrise will not cover the nursery expenses of the 2 children and we will therefore be worse off.

This seems like absolute madness! But it will cost us around £30k in 3 years, and the payrise will be just shy of that over than time period (after tax).

I've suggested to DH that he counter offers for a LOWER rise, which will put him just below the threshold for the free hours. This is still a good rise.

The alternative is to ask for a rise that will cover the loss of the 30 free hours, but this is quite a bit more, taking in to consideration tax.

It seems like a totally bonkers situation to be in (5 years ago we were scraping money together to pay the bills!) but can anyone else an issue with rejecting a payrise?

66redballons

not only am I expecting advice, I am receiving advice.

Thanks everyone. DH has only just told me so I did some quick reading and maths. I'm going to sit down properly with the advice given and take a look at the figures.

Turning down a pensionable salary from which bonuses and future salary increases, redundancy payments and future external jobs offers are calculated / based off is bonkers. Even more so to get a childcare benefit which might be withdrawn or amended either at core or extra level.

I doubt most employers inc a PLC will offer a means of effectively deferring the salary into shares (bonus yes salary no). Your husband cd voluntarily pay into pension or even better - as you want to claim childcare from the government - make a charitable donation to bring down his income and benefit a charity that helps those truly impoverished, children, or women struggling to get back into the workplace.

Yours astonished
CL

I would tell your DH to accept the pay rise and just increase pension contributions (as salary sacrifice) for the three year period

Take the pay rise. If you can pay into pension or do some in shares etc. Do so. Your nursery fees will only last a couple of years. The pay rise will - hopefully- last much longer. Even if it's a short term loss it doesn't make sense to turn this down.

Op your nursery will have calculated costs and have them to hand for if you are on 30 or 15 free hours (or none before they are old enough) - best get them from nursery rather than trying to calculate it yourself as they have all sorts of ways of working it out.

Hercwasonaroll the way our nursery works it, the 30 free hours is spread evenly across the year so we can set up DD or standing orders. Full time, 2 kids, no free hours = £2373.45 per month

"adjusted net income" is "taxable income after deductions" - ie Gross (very confusingly worded).

If your DH "adjusted net income" is £100k + then he may also be caught by the pension contribution tapering rules and unable to make additional contributions as pp suggest.

In his position I would ask for the payrise to be just below the threshold (of course he will have to "re-earn" the bit foregone just now such is the way of the private sector).

Lots of people within UC / TC have close to 100% marginal tax rates and arrange their working patterns with this in mind. Ignore the moral outragers. 40% income tax on a £20k payrise is only the starting deduction.

I wouldn’t describe someone who is concerned about being slightly over the threshold for freebies as rich.

However it’s dumb to turn down a promotion and wage rise over free childcare. Then again loads of folk seem to only work part time to keep their benefit entitlement.

Your husband should ask for more money not less

Are you saying the payrise is £10k per year, after tax?

And the change in cost would be £12k per year if you have no free hours at all. Otherwise it would be presumably about £6k if you had half the hours?

If you put a few grand extra in a pension (even a SIPP I think, if you can't add extra to the company one) then I think that would mean you benefited overall, at least in the long run and possibly in the short run.

X-post Chappellass makes a fair point regarding choosing a charity to donate to rather than foregoing the payrise.

HE should DEF take the raise (and see about salary sacrifice) because all other raises after this will depend on it.

I'm pretty sure you will still get the 15 hours. I think the 20% tax free saving is capped at 100k.

How are you calculating what childcare care savings you lose?

The thing is you may be a bit worse off in the short run but as soon as your oldest starts school, your nursery fees will be much lower but your DH's salary will still be at the higher amount. It is very short sighted to ask for a smaller amount now, unless they would agree to give you the full amount in a year's time when your oldest starts school (very unlikely)

I would look for a solution like asking for part of the salary in shares or the higher pension contributions suggestion mentioned by a PP Alternatively you can take the reduction in income and see it for what it is , a short term difficulty whereby you are investing a small drop in income now so that in a year or so, you will be better off than you would be if you ask for less now.

I'd rather you paid your nursery fees, and then there is more money for the people that actually need it. YABU.

Take the pay rise as it has been offered, they're only in nursery a couple of years and the pay rise will last longer. You're being rather short-sighted turning it down.

I'd accept the rise even if you will be worse of. Long term it's for the best, also if your DH was to change jobs he may get another rise and jump an income level.
We had a similar situation when my husband got a pay rise but at the time of you earned between 100 and I think 112k the tax was really high. So he took the rise and we were no better off that year until the following year or so when he got his next payrise.

Is the DH going to be taking home more than 100k after pension etc?

I'm sorry I'm one of those who hasn't read the full thread, I read page 1.

I echo what several people said that your DH should take the raise but increase pension contributions to keep under the threshold to lose the free hours.

For those decrying this you never know what your situation will be in a few years time, everything can turn on a sixpence. Investing more in pension now will only benefit you later in life!

@Bairnsmum05

Does that essentially mean that rather than paying for your own childcare which you can afford, you will be receiving funding from the government to cover your childcare? I'm a bit out of touch with this as my kids are teenagers now. However if I'm correct, why would you take money which you could do without?

Shame on OP claiming what you clearly don’t need. You sound like the Harry Enfield character who likes to tell people he’s considerably richer than other people. It’s a tone deaf post considering how many families are struggling to even feed their families in the current climate.

@Calic0

Sorry, but there just seems to be something slightly morally reprehensible about comparatively wealthy and successful people trying to figure out how to manipulate things so as to extract every last benefit from the state. You would no longer need free hours because you could, you know, pay for your child yourself.

Sorry, but this sort of attitude boils my piss.

This, so true 😂

What are you expecting to save in nursery costs? You get the equivalent of 30 hours for 38 weeks this is not the same as a free full time place plus you often have to pay a daily top up. DC2 starts pre school in Sept & I have to pay £5 a day during TT.

I don't think the OP is being unreasonable asking how she can best minimise their costs and maximise their income. £100k is a lot (even in a one person household) but it's not enough to just throw money away (think of all the super rich people dodging tax - it's these people that we should focus on).

@Calic0

Sorry, but there just seems to be something slightly morally reprehensible about comparatively wealthy and successful people trying to figure out how to manipulate things so as to extract every last benefit from the state. You would no longer need free hours because you could, you know, pay for your child yourself.

Sorry, but this sort of attitude boils my piss.

Agreed

A friend of mine worked at an airline, after childcare she was left with £30 a month from her salary.

I asked her why she did it and she said she wanted to make the sacrifice now as she could keep her hand in, and would make more in the long run.

I have no sympathy for someone who manipulates the system to help themselves, what you both earn is more than enough to pay childcare.

There is a cut-off at £100k because at that income you are meant to afford your own childcare! Consider yourselves lucky.

This just shows the damage that these "tax the rich" schemes cause. It's not just loss of childcare when your income goes over £100k. It's the whopping 62% marginal tax rate on incomes between £100-£125k. It's exactly why the likes of GPs and dentists cut down their working hours to bring their wages back under £100k and they can't just increase their pensions because they're already at the lifetime pension allowance due to NHS superannuation so get a tax bill for breaching pension limits too (thankfully now resolved)!

We really need to scrap all these cliff edges and thresholds as they're just doing more harm than good.