Current tax thresholds act as a disincentive

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I have been asked to apply for a promotion at work starting next year. This would mean a big jump in responsibility and a 10k payrise. I've been working it all out and because it takes me into a higher rate bracket and we have 4 DC, I would lose all CB and pay 40% of this in tax. I would actually only see £150 extra per month which whilst nice would not make up for the increase in responsibility and potential impact this would have on our lives and also doesn't cover any extra costs incurred for childcare/commute etc . I feel so disheartened.

FYI I am happy to pay tax and happy to pay more but this feels like such a steep cliff edge between being worth it and not. Surely many people must find this and we are missing out on a lot of talented people where it's not worth it making that jump.

YANBU, this is the reason I won’t do overtime:

40% tax
12% national insurance
9% student loan
9% pension

I would get 30p for every £1 I earn!

It would incentivise some people, as any raise in tax thresholds/new allowance does. The difficult question is where we want to draw the balance I guess, whether it's more advantageous to society to have the extra labour of the people who'd be incentivised to work more or the tax that would be lost from people who'd get it but didn't need it as an incentive.

What about childcare vouchers?

Rubbish. Most people hit that when they start earning enough to stop earning tax credits. Your salary goes up but your take home goes down. It’s rubbish.

I was in a similar position and decided not to go for it as didn’t really want all the extra work.
however I did discover national insurance drops down to 2.5% at the higher tax bracket so tax is actually 42.5% vs 32.5% so it wasn’t actually a big as a difference as I first thought.

The pension contribution thing only counts for child benefit if you pay it into a private pension. Work place schemes don’t count. I had to pay back £1800 last year despite paying 12.5% into my work pension.

..and they say the Tories are the party of aspiration!

I was quite surprised the Tories left the 40% threshold where it was in the recent budget. Seems like such an easy sell for them.

I agree. We actually need more tax brackets rather than jumping 20, 40, then just 45.

How much better it would be at e.g £0k-£20k you pay 10%, £20k-40k 20%, £40k- £60k 30%, £60k-100k 40%, £100k+ 50%

That doesn't sound right to me. It's not that I specifically know better, I just find it implausible that the law would treat the two differently.

I've just googled and a random web page says that occupational and personal pension schemes are treated the same.

adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/

The 'income' used by HM Revenue & Customs to calculate the charge is 'adjusted net income'.
Any pension contributions made by an individual, whether it's a contributions to an occupational pension scheme or to a personal pension, will reduce the final amount of adjusted net income. If this is enough to get it below £50,000, the charge will be avoided; if it ends up between £50,000 and £60,000, the charge will be reduced.

This is a bit of a shortsighted argument
You would be reducing what is owed on your student loan and increasing your pension

That's wrong. It goes by what's on your P60 which should be net of any pension contribution where to employer or private scheme.

There is too much focus on the marginal rate of income tax and not enough on the overall tax take. Also the corporate tax regime is based on a business world which has not existed for at least 20 years.

Yeah we had this issue too. It was actually quite gutting as we celebrated, of course, and then were like "oh, we'll actually weirdly be worse off"

Well mine didn’t count - looking at the guidance maybe it’s because I pay higher rate tax. I queried it more than once and still had to pay the whole lot back.

This is absolutely a thing. Going over 100k can be very costly - the marginal tax rate is 60% even though this is not the cited rate (because you lose the tax free allowance gradually from 100k) and there are various benefits that don’t apply from 100k eg you don’t get 30 hours childcare for 3 year olds, you aren’t eligible for tax free child care.

A lot of the system is very flawed.

Yes, 100k is another bottleneck. So too are the situations where people are going to lose most of every pound they earn in withdrawal of top up benefits. We have these spread across the income spectrum in the UK, not a niche thing at all. But obviously the 50-60k salary zone where you get the double whammy of child benefit withdrawal and the 40% rate tends to come up most on here, due to the demographic.

I am in this situation and a lone parent sogave no other income so CB solely off mine, whereas two parents on 45k each get full CB. So annoying!

If I offered someone a20% pay rise and they declined I'm not sure I ever would again. Be careful what you are ruling out. You are still better off

Was your pension a salary sacrifice scheme? I think it only counts if it is and your pension comes out of your gross earnings. Then it effectively reduces the amount of earnings that you have to pay tax on. Not all pension schemes are salary sacrifice schemes and some of them come out of net pay.

But surely if you dint take this promotion and rise it prevents you taking the next step up in the long term.

Do you have a partner? Surely the increased childcare care costs will be split with them?

Depends on how you define 'better off'. I would agree that OP should be careful what she gives up, but that applies to more things than the money.

I have put YABU because wherever the threshold is, it will affect some individuals quite a lot.

I think you’re shortsighted.
That step up that gets you a £10K pay rise now, is what potentially gives you £20K more than now in 2 years…
Why does more responsibility mean more childcare costs? Is it because you have to give up WFH and go into an office?
Can their father flex his hours to support your career development and pay profession?

I’d do as a PP suggested - enough into pension to keep all your CB. You might even keep some of it as your existing pension payment might be keeping you partly under £60K.

Even if you end up net the same money for added responsibility, are you only looking at money? Quite apart from pay and career progression, taking on more responsibilities can make your working life more interesting!

On a more general point, I think YABU because your situation is niche. 4 lots of CB to lose is unusual.