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.

Four DC is niche, true, but the 50-60k bottleneck for parents is pretty well known. And if anything it's likely to become more common, bearing in mind that inflation is rising but neither the 40% nor CB thresholds look like they're going to be going up to match any time soon.

I think it's an issue worth considering. It's a decade since the decision to remove universal CB and tie it to higher rate taxpayer status was taken, with the figure being picked on the grounds of administrative ease and at a time when we had no general labour shortage to worry about. It may be that we're still best off keeping the 40% and CB thresholds where they are, but the factors that were in place when we initially chose it aren't the same now.

YANBU. This is kind of what Truss was getting at and it has led to low productivity and a brain drain. It’s also what is causing a crisis in the NHS. It’s even worse when you go up to the next bracket which is notorious as you lose personal allowance. Many consultants, dentists etc actively drop working hours to avoid the 100k-125k tax anomaly where you are paying roughly 70 % tax and NI combined and then student loans.

It is a huge problem in specialist industries such as medicine, tech, etc.

If a Dr is earning £100-125,000 and paying student tax, they must have gone to uni in the last 10 years. DD had the old loan snd went in 2010 and has paid it off. All high earners have issues with pension pots being taxed when they get to £1.1m. Everyone who has skills and is a high tax payer. If everyone works part time we really won’t get productivity or a tax take big enough to fund our services. People do need to keep more of earnings.

It is a very large organisation so I don't perceive this will be limiting but obviously it will take me longer to progress if I do choose to make the move up

It's not quite so simple. It's more that I would be expected to stay in the office for longer to provide the cover as a senior member of staff. At the moment I do the school run on my way home. However, I wouldn't be able to do that which would mean DH would have to travel to do that (25 mins each way for him) or we'd have to access wraparound care. Both of those options will cost money. I'll also be out of the house for longer meaning that ideally I'd outsource some of household stuff but that £150 extra a month won't even cover the childcare let alone a cleaner. So ultimately I'd be poorer and probably more stressed.

“At the moment I do the school run on my way home. However, I wouldn't be able to do that which would mean DH would have to travel to do that (25 mins each way for him)”

I’m going to throw in a, “so?”

Is that worth it for your career development and career progression?

It might not be - but don’t write it off.

The big problem is the CB - the policy of doing it on highest earner is just ridiculous, it should be on total household income as that would smooth out the bumps for a lot of people (though not for all outliers). On the whole I would say it is worth it because it's a platform from which you can go even higher, at which point you will see more money and have a better pension too.

To lose all your CB you would have to be earning quite a bit over £60k unless you are not putting anything in a pension which at that earnings level is pretty unlikely. I think the question is about what you want your life to look like rather than an issue about taxes. Do you want to earn a bit more for what might be quite a bit more work but gives you more options in future, or do you want to spend this part of your life prioritising home over work? Neither is a bad option, it's just which one suits your family.

This is kind of what Truss was getting at and it has led to low productivity and a brain drain.

And yet she did nothing about this particular bottleneck when she had the chance!

Hang on, Truss was in Govt for the last ten years and signed off all of these changes & 10 years of Austerity, probably the biggest act of self harm, alongside Brexit.

She is an idiot.

TBH the people i know who are leaving the country are healthcare staff and teachers, none of whom are anywhere the 40% tax bracket, the ones who are are earning 100k plus are quite happy here.

Don’t recall Truss as Chancellor. Thank God.

Dont discount it straight away. There might be hidden things like additional benefits that actually work out well financially even if they're not included in the salary. A higher % bonus. More holiday (which when kids are at school means less holiday clubs). Also more pension contributions which can make a big difference eventually.

Also kids are only in childcare a short time. When it's no longer needed the difference will be bigger.

Why don’t you negotiate working part time in new time, that way you get the development benefits without loosing school pick up and cb.

When the government takes this % in tax and still goes into massive debt, it's telling us that our government is too expensive/is spending too much.

Well, it is spending too much. On the wrong things. It would be nice to see where the money was going, including lucrative PPE contracts for bezzie mates.

The massive debt is mostly due to COVID and Kwarteng's Idiot Budget - the markets hated it and let him know.

This is why I went slightly part time. Is it an option for you?

At full time I pay 8.5% pension contribution and 40% tax and lose CB. I dropped a day a week and pay 6.8% pension (it drops me in to a lower band) , keep CB and 20% tax. With a day less of childcare I’m actually better off than working full time.

I plan to go back to full time eventually but it doesn’t add up at the moment.

I'd still take it.

See if you can work compressed hours so you finish earlier one day.
Dh does 2 days.
Pay for wraparound care.

Then look at your salary. Salary sacrifice childcare, car, any pension (and btw to whoever posted about pensions, you were incorrectly advised as all pension contributions count), charitable donations. What's your actual salary after all that? And how much cb do you lose?

Doesn't the decision also come down to the longer term potential of your career? You mentioned this is a big company so am guessing the opportunity for further promotion is possible?

If you don't think you'll be climbing any higher then you'd probably be right to hold off, but if you could move again in a few years then I'd feel like I was cutting off my nose a bit.

How's your current role? Is it still stimulating? Also, is this £10k increase right or a low offer? Being asked to apply is very flattering but needs to be met with the appropriate increase in salary.

Well that's just shit management, isn't it?

Not everyonet thinks money is the most important thing in life.

Or that the people running the show are fucking idiots, perhaps.

I don't think that changing the people or party will help much. It's more systemic than that

Could you do 4 days in the new role? So a promotion, less hours but the same money?

We were in that position with DH's promotion last year. Wasn't really worth it, but we looked at it as a means to an end. The next promotion will be even bigger and we'll be much better off.

Even if the pension contributions were not salary sacrifice, I still think they will reduce taxable income, and this person would get the money back if they did a tax return.

I really want to know the facts, because I'm sure they are very different from what's being conveyed. It's not at all clear who is telling her this, and why.

They could do a dummy tax return, register online and do one without necessarily submitting it, and that would tell them definitively if they've been over-taxed. I would not rely on anyone I'm talking to on the phone, either at my employer or HMRC, to be getting this right.

There are some types of pension contributions where you are supposed to tell HMRC you made them via your tax return and they refund you the 20% or 40% tax. That may be what the poster is talking about, but they didn't do the tax return, so didn't get their 40% tax back and also didn't get their taxable income reduced and their child benefit paid. Expensive mistake if so.