DH and I going part time to deliberately reduce wages

[Bucketheadbucketbum]

Just working out the free childcare hours and actually DH and I will be muxh better off if we both dropped to 3- 4 day week to deliberately reduce our incomes. Would obviously be nice way to live too! Anyone else doing same? Seems mental but we've looked at it 100 times over and it's true!

Exactly!

'I have never inherited anything', well clearly you've inherited / benefitted from the luck of having good enough mental and physical health to be so successful, to name but a few things.

A large proportion of people earning 50-60k who have children will still have student loans. They'll also be contributing to a pension. And let's try it with 2 children... I'll do Scottish numbers

So we start with 10k extra
Tax at 42% (from April) = £4200
National Insurance = £200
Pension @ 6% = £600
Student loan @9% = £900
Child benefit x 2 = £1885

Total effective deductions =£7785
Leaves a grand total of £2,215 for your 10k, which is probably a promotion requiring extra work. You can see why people feel it's not worth it

@AviMav yes the more hours you work the more childcare you pay but the problem is when working takes you over a threshold (e.g. the £50k threshold for child benefit) the impact is worse. For those earning £100k the right to 30 hours and tax free childcare ends so if they go £1 over £100k they can end up throusands of pounds worse off. It’s nonsense. The tax system is a nonsense.

The state seems to have wanted to make the tax system extremely complicated, more than in the past when I used to get childbenefit (it was universal whatever your income as we were in those days all in it together - putting in and taking out, not any more of course)....
You used to get a single person tax allowance whatever you earned. Now that gradually goes once you hit the £100k mark.

The £2k a year per child childcare thing - not available for higher earners.,

The 30 free hours for 3 years olds - not available for higher earners
On and on and on they have gone in chipping back against people at that level with all these complex thresholds as to when you pay graduate tax/student loan 9%, when child benefit lost, when the £2k a year lost, when the single person allowance lost, when the new 1 year old free hours not available to higher earners.

However any higher earners do be aware the free hours does not really work anyway - it is a kind of ghost or mirage if you heed 10 hours x 5 days s week which is about 50 hours for most working parents as the parents of 1 year olds in nursery have been paying for the free hours of the 3 year old's parents etc so you may not be missing much at all with the supposed 30 free hours. Unless nurseries in effect make the children of a mother on £100k pay even more to subsidise the nursery charges of the mother of a 1 year old who is on £95k.

Blame the system not the individual. Go for it OP.

Yes @StatisticallyChallenged and @AngryBirdsNoMore

The point is that the difference is only about £3k per year for the £50-60k jump, so if you deduct costs like childcare (esp if more than one child) and commuting, then you can easily see how stopping going to work for a day per week and earning £50k could leave you better off than doing 5 days and earning £60k.

Same for the £99-135k jump. Basically, you don't earn that much more per month and so much of that will be eaten up through childcare and commuting etc if you have more than one child. @ScruffyGiraffes has an extreme case due to special needs children (for whom she should have state support, but the state has disowned responsibility as she is "high earning", despite the fact that they probably wouldn't for 2x£40k earners who would take home the same amount. But even assuming no SEN, by earning over £100k, you have only 15 free hours and no tax free childcare, so that means that you are massively down on childcare as a result of earning just over £100k and the state takes your personal allowance (so even without childcare costs your effective rate of tax is well over 60%)

I don't feel sorry for anyone earning over £100k (except perhaps a single parent as they get massively fucked over).

Anyone who thinks their struggling when themselves and their partner earns over £100k need to move somewhere cheaper, take their kids out of private school, and skip the bifold doors kitchen extension.. that should help.

I think everyone has to do what works for them. I work 30 hours my partner works 40 hours we don't get any help at all were above the threshold

Childcare has nearly cleaned us out over the years.

In September both children will be in school full time but DP compresses his hours to do 3 days in the week and a Saturday and Sunday one week then not the weekend the next and I do 4 days so we only have 2 days wraparound but that's still £15 per day per child so £60 per week, Then there's the holiday clubs.

I'm disappointed there will be funding from 1 after the event but hopefully it'll help people go back to work but it's the age old saying they need to "make work pay"!

If we could afford it I would drop a day so we would then only have one day of wraparound and one day a week to cover in the holidays but not an option at the moment!

At one point we were paying 3 days full time childcare and wraparound and it was a hideous amount of money.

I agree with this completely. I have followed the thread from the beginning and have been shocked at the majority of comments from posters who don't have any understanding of economic reality and secondly appear to just be spiteful and jealous.

As I've said before too, I say all this as someone with no skin in this game at at all. I'm a low earner overall and I will never ever earn that kind of money.

Absolutely I agree. I said it earlier. I can't blame OP..Good luck to her.

Yes @StatisticallyChallenged

I really agree - plus if you work more, you'll have more childcare costs too.

Everyone does though. Even at the lower earners it's the same dilemma this isn't unquie to higher tax payers. Its a system problem .....

@AviMav nope. Nowhere for lower earners is there a cliff edge where if they earn any extra money their net pay drops by ten of thousands of pounds, where they will be paying over 100% effective tax. It absolutely is NOT the same for people earning lower incomes. Please read the research and data posted in the thread before making such ignorant and factually wrong comments.

If it works for you financially & means you have a better quality of family life then go for it. That is what the support is there for.
Those who tend to benefit from this help most are single parents. They often don’t have enough income working part time to afford childcare, even with the free hours, & they can’t work full time as they tend to need to work within school hours due to limited childcare options.
You aren’t doing anything wrong or illegal. You’ll still be better off than single parents as you can work different hours & reply on each-other for childcare support lowering your childcare bill.

But if you earn less than 100k you get help with these costs, if you earn less than 50k you get even more. That help can be worth literally thousands of pounds of post tax income. Someone who has just tipped into the 100k tax range will need to earn £3,000 to see £1,000 so the loss of £24,000 nursery fee subsidy is "worth" £60,000 of taxed income.

It is unique to the 100k threshold to have the situation where you actually go negative - not just reduced benefit, actually make a loss from earning more.

A tiny movement - like a couple of £ - could tip you over the limit and cost you that childcare support which is worth thousands.

'Climb out of' is a weird phrase. If you earn a lot of money, you get taxed a lot.

<shrug>

I'm not struggling. Not at all.

But if I can choose between working full time and working reduced hours, and the effect of the £100k threshold is that I will take home the same salary for either option, I'm going to work reduced hours. I'm not working for free.

It's a mild annoyance for me (I didn't get to keep any of my bonus this year, it all got sacrificed into my pension to keep me below the threshold. But I can still pay my bills). But if the government is making the threshold at £100k even sharper by increasing the value of the sub-£100k childcare subsidies, then they are incentivising a lot of high-earning people to cut their hours. The overall effect on UK productivity is not going to be good.

I haven’t read the whole thread and also didn’t look in too much detail into the rules of the new policy.

But it sounds like it is people on high incomes that can have much nicer family life by reducing hours and hence their incomes (where possible by their employers) and utilising the free child care hours.

I’m not sure if for the government this really is that big an issue. But yes, I have not done the math!!

If it only makes sense for higher earners they still will be paying relatively high taxes. I imagine the jobs require certain level of skill - are those jobs in general hard to fill?

If the intention of the government was to get people back to work into roles more in the middle where the salaries are not as high and therefore people would not have any net benefit by utilising the free childcare but at the same time cutting their hours, maybe the net benefit of the policy for the government is still positive?

In general for the higher earning jobs don’t they get filled, or are there many open vacancies in some high earning sectors? So the job will be split between two people, and yes, that might mean less tax paid as by splitting them higher tax threshold might not be reached for the two individuals. I do wonder, what the numbers would look like at national level, even if some people will now be able to afford work less and therefore have a better family life, but effectively their take home income will be possibly close to unchanged. Unlike the people in the middle whose take home income will be higher if they go back to work and utilise the free hours.

May be those who put in less than they claim? Unlikely to include higher rate tax payers then - like the OP

My sister earns what would be £125k ish for a 5 day week. She purposely works 4 days a week to keep her salary at the £100k mark. She actually gets pissed off when she gets her annual bonus because she has to put it all into her pension so as to avoid the punitive 62% marginal rate of tax. (obviously this is good for the longer term but short term means a zero bonus).
She'd far rather work 5 days a week and in fact has been approached for other jobs that pay a bit more but she won't do it.

Apologies, that was not clear in original post.

And so she will be stuck at her level for ever more because she resents paying tax on her income. Strong reasoning skills - I'm sure she'll go far 👍

In general for the higher earning jobs don’t they get filled, or are there many open vacancies in some high earning sectors?

That isn't how the economy works. Particularly if you wanf growth and more tax revenue. These are the people who generate it, create more jobs, would fill the unfilled jobs in many skills-shortage areas where more people are needed so no, if they don't work, that tax money goes unpaid. Per the Government's own research and that of many economists, this is one major reason why the UK has had the lowest producitivity growth in the G7 for the last decade and there's so little tax revenue available to pay for public services. If the tax code doesn't get fixed, there will gradually be even less.

Absolutely appauling and explains a lot why our country is such a mess. I paid for my childrens childcare, and guess my taxes will pay for yours.