30 hours free childcare- means tested?!

[bingbongbang23]

Sure I will get blasted, but I only just realised that the 30hr free childcare is means tested. I have paid full price for my child for past 2 years- at a whopping £1240 a month, but it is what it is.

Selfishly, i was so looking forward to her turning 3 and getting the free hours. Would be a massive help with mortgage going up. However I don't qualify. And it is not a sliding scale, I don't qualify for anything. So I would actually be better off reducing hours so I would qualify for the free hours- in what world should that be the case?! Makes no sense to me!

then have a couple where one doesn't work and the other earns £101k and they don't qualify

If one of them doesn't work, why do they need subsidised 30 hours childcare? Surely the 15hrs every one gets is enough?

Ah, the old "penalised for working hard" tripe.

You are not being penalised for working hard. You can afford childcare without help.

The people who are penalised for working hard are the nurses, teachers, carers, labourers and so on, who get crap pay for what they actually do.

The other doesn't work because the cost of sending the child to nursery is more than they would earn and therefore they give up work.

A full time nursery place for under 3's where I live is £1850 a month. Someone would need to earn £27k just to break even with childcare costs.

But this argument doesn't work with our tax system. Someone earning £101k takes home less (due to the 60% tax rate) in their pay packet each month than someone on £99k, yet the £99k person apparently cannot afford childcare but the £101k person can.

Add to this that you can be in a situation where a household with 2 people earning £99k are entitled to all of the support but a household where 1 person earns £101k and the other earning £25k will get nothing until the child is 3. The consequence of this is that the person earning £25k will quit work as childcare costs more than they earn. This person on £25k may well be a nurse, carer, labourer etc. and they are now out of the system and not contributing any tax.

For clarity, I am referring to the new childcare funding in this post and not the 15/30 hours entitlement at 3.

Perhaps a better way to put it would be penalised for working more, rather than working hard. Because it doesn't especially matter whether the person is working hard or swinging the lead as they do whatever it is that takes them from £99.9k to 101k. The outcome financially is still the same. And therefore it acts as a potential disincentive for someone to do a thing that leads to paying more into the system.

If someone earns 101k then surely they just put a smidge more in their pension to bring them under the cap?

And that's from someone who earns a third of that

I think it often depends whether earning the 101k involves any extra work or not. If you were going to get it regardless, maybe a cost of living raise or whatever, it would make most sense to increase pension contributions. If however it involves working an extra few shifts, that raises the question of whether it's worth bothering or not.

This is how we've dealt with it in our house when facing bottlenecks lower down the income spectrum- don't think the 100k one is ever going to be an issue for us haha! If the extra money is automatic, of course you take it and just adjust pension accordingly. If you have to do something extra to get it, you do the calculation about whether it's worth the effort. In my case I decided it wasn't.

I agree OP.

The cost of childcare is a challenge for parent on even quite high incomes - and, as you say, if you’re paying a lot of tax I think you should probably have access to the services you are funding.

For context for a three year old (15 free hours) and a one year old at my local nursery:

• £2,200 for the baby
• £1,750 for the three year old (Inc 15 hours)

Thats £3,950 a month.

The take home on £100k a year Inc student loan is £4,792 a month.

This means the childcare is 82% of a £100k wage.

It creates an effective 100% tax rate between about £100-150k for those with two children.

I understand your frustration (even though I do get the hours as we don’t earn the amount), we’re not entitled to child benefit. It does rather feel like the cut offs are plucked randomly out of thin air and not regularly reassessed in line with COL.

you need to sit down and do the maths to work out what is finacially better for you. Exactly the same way my cousin (and many other people I know) who have calculated that their best financial option is to work 16 hours, add universal credit and other benefits totals more than they have the potential to earn (they would only gain employment in what is considered low skilled roles. That’s not me saying they are low skilled roles -carers and admin roles are incredibly undervalued/underpaid.) once you’ve done the maths work out what makes the most sense for your family. I am about to have my third and when I return to work will just do school hours as the cost for wrap around for my older 2, plus extended long days for my 3rd I wouldn’t earn enough to cover/make working worth it. Ie I can work 6 hours and pay less childcare, or work 7.5 hours and pay more childcare. My take home would be about the same. So work out the maths and make a decision from there!

But if you need this much childcare then surely the household has 2x working parents (so the income is higher than 100k)?

@SecondUsername4me

Sure, but the other parent may well be earning an average wage.

Say they earn £30,000. This is £1,915 a month take home.

This means your childcare is 206% of
that parents wage. Which, inevitably, means that parent probably stops working.

@SecondUsername4me

It also means that in this ‘very high earning’ household with £130k income.

post tax income - £4,792 + £1,915 = £6,707

Less £3,950 on nursery = £2,757

So they have £2,757 to cover a mortgage on a family home, commuting, bills etc.

I’d argue that yes, they should be able to access the same childcare support as those on lower incomes.

Why are you measuring nursery fees against one wage? The figures you supply for your couple example is £6700 take home per month. Too bloody right they don't need 30 hours free. They get 15 as does everyone. And tbh if the 100k earner upped their pensions a small amount they would then get the full 30 for free.

nobody on 100k needs subsidised childcare. check your privilege ffs

Especially given the fact that they've chosen to have a second child at a time which means 2x nursery fees overlapping.

Or increase your pension contributions if you are only just over the threshold? It is about taxable income.

Oh come on.

So…. Should people on lower incomes not be eligible for childcare support if they have two in nursery at the same time to then?

People should have families they can afford within what they can pay for and what the state has decided they can have support with. Believe me, even those on much lower incomes aren't having multiple kids back to back just because of the 30 free hours for their 3yos. Because the amount they pay on top for full time year round childcare is a fair chunk of their take home pay.

This is not just about the current 15/30 hours at 3 years old.

The gap widens with the new childcare funding. Children under 3 with parents who work will be entitled to 30 hours however those with 1 parent earning over £100k get nothing. No 15 hours. No tax-free childcare. Nothing.

I appreciate there needs to be a cut-off somewhere and the current 15/30 for 3 year olds is probably fair enough but this should continue with the new funding arrangements for the under 3's too.

Why?

In my example the couple are spending 60% of their income on childcare. I’d say that’s a fair chunk.

I have no issue with funding services to ensure everyone has a good quality of life, I merely object to the idea that some people should be excluded from those services while significantly funding them, and despite the fact it clearly negatively impacts those people (eg the lower earner in a relationship potentially having to stop
work).

Combined with the loss of the personal allowance at £100k, parents of preschoolers are paying effective rates of 90%+ on quite a significant % of their income. That is not good - see posters here say they may as well work less hours. This reduces the overall tax take.

@PepeLePugh are £100k+ earners not eligible for the 15 hours? I believed they were.

If so this makes it even more extreme - a parent with two preschoolers will be looking at a 100% effective tax rate from £100-150k.

Everything I have read suggests this is the case.

The current 15hours at 3 years old is universal - this is for working parents, parents earning over £100k and parents not working at all. The new childcare funding is for those currently eligible for 30 hours which is for working parents and would therefore exclude those either not working or where a parent earns over £100k.

This is an interesting article that explains far better than I could the cliff edge of earning over £100k and the impact of the cost of childcare.

ifamagazine.com/hunts-new-childcare-plans-make-punitive-100000-earnings-cliff-edge-eye-watering/