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!

Why does the 30k person need to stop working though?

The 100k person and the 30k person could each work 4 days - this frees up 2 days for them to cover childcare.

The 100k person could funnel more money into their pension

The couple could take the (chosen) hit on double childcare for a year in order to retain their careers, as a short term pain that they can afford. Then once the baby hits 3yo and the older one is at school they will have much more spare funds.

And yes - they do contribute more in taxes (we'll, the 100k one does) but this is a suitable set up for a sensible nation, that those who earn more contribute more.

The couples income puts them very comfortably within the top 5% of earners in the UK.

This.

It's unbelievable.

Given that the care sector is massively struggling for staff, especially post Brexit, how in the world does it make sense to have a system where a qualified carer is better off only working 16 hours a week and claiming Universal Credit?

Because even a FT carer would get UC top ups as the wage alone isn't sufficient to survive.

What I'm saying is that there shouldn't be any feature of the system which disincentivises people from working more than 16 hours, but particularly in the case of people who are qualified to do much needed jobs.

Then they need to pay a decent wage for these roles. But they don't. Why? Because they are usually the domain of women, and women's work is under valued.

So instead, the govt tops up. And the top up system doesn't actually benefit the worker on 16h to work more hours. Because all that happens is their UC reduces by the value they earn so every hour they work over 16 they essentially are doing it unpaid.

'Need' is the wrong way to look at it. People make the choices they think are best for themselves and their families, and in the scenario outlined, the incentives mean that may well look like deciding to work less for a period. Sure, it's not the only option, but it's one of the ways people respond to cliff edges and bottlenecks, and not just at 100k either. Works the same way on lower incomes too. I know, I've done it.

There are wider implications if enough people do this, because of both our current shortage of workers and because they'll end up paying less into the pot. This is why it's not a good idea to arrange things so that people can be worse off by working more, or that they don't see much benefit from it.

I don't think it's as simple as these roles being poorly paid because they are mostly done by women.

Care is already incredibly expensive and it would become even more expensive if carers were paid more. I'm not saying they shouldn't be paid more, by the way, I think they should be paid more.

But ultimately it comes down to who pays for it, and I think there are a lot of voters who believe on the one hand that carers should be paid more, but also on the other hand have an elderly parent in a care home which already costs a grand a week and don't particularly want to see that bill rise by 20%.

And of course for all the people who can't afford to pay their own care or who have hit the lifetime limit for care costs, the taxpayer will be making up the shortfall either way, whether that is by topping up the salaries of the low paid workers caring for that person or picking up the entire bill for their care costs, or indeed both.

This tweet from the Institute of Fiscal Studies explains the problem succinctly. A parent earning £130k with two children would be worse off than a parent earning £99k. The rules do not currently make sense.

We're in the same situation for child benefit. My DH earns literally just over the threshold, whereas I'm on £23k pa, but because of his salary alone we no longer qualify for child benefit, which was genuinely a noticeable support for us each month. Feels like this system penalises women- who are often the ones a) claiming the child benefit and b) earning less due to career breaks/ part time working associated with having children. It does sting a bit that some of our friends who have a combined income of just under £100k can still claim full child benefit.

If it’s so close then youl still get some child benefit anyway. And he can put a bit extra into pension to take it under.

Great article @WonkyDonkey3

”Parents in areas where childcare is most expensive will be hit hardest, as those 30 free hours a week will cost far more. Someone in inner London, where costs are highest, who is claiming for two children will lose a benefit worth £23,300 a year just in free childcare hours*. On top of that they lose their entitlement to tax-free childcare, which is worth up to £2,000 per child each year. It means that when one parent gets a pay rise taking them over that £100,000 limit, they lose £27,300 of entitlement in an instant.

What’s even more eye-opening is just how long it takes before their disposable income will resume to their previous levels, accounting for post-tax income and the value of the childcare support. Their salary would need to increase to £156,279 before they get back to the same disposable income as when they were earning £100,000. This puts parents in the ridiculous place where they are effectively worse off earning between £100,000 and £156,000.”

Loss of free hours + tax free childcare means parents with two preschoolers will be £0 better off for earning £156k vs £100k.

Surely no one thinks this is ‘fair’?

Not saying the rules are fair but you have a household income of roughly £123k and you need child benefit? Something wrong with your budgeting!

Something wrong with your maths on that one too unfortunately.

I'm confused. at 100k you lose 15 of the 30 hours for 3 and 4 years not all 30 of them. for under 3s i think it will be completely lost. you also lose the tax free childcare grant which is annoying.

Also are you aware it's adjusted net income so if you are earning £101k and are paying a 5% pension (which most people probably will) then you will still be under the band limit as your adjusted net income is is 96k not 101k.

You can also add additional contributions to your pension if it's close to the limit. My husband will likely go over that band next year so we plan to invest in his (currently meagre) pension more and kill two birds really

But would you actually be better off reducing your hours? We weren't eligible for the 30 hours either due to DH's income, but we got the universal 15 and when we spoke to another parent at our nursery at the time whose child attended full time like ours, the difference between the 15 and 30 hours only reduced their bill from by another £300/month.

I think it's objectively idiotic.

Fair enough. Confused as we were talking about the threshold of £100k but still wonder how people are struggling on these wages. Try waiting for your child benefit so you can get a decent coat for your child....imagine that

The tax system in the UK is ridiculous, with all sorts of disincentives for working past arbitrary levels of pay.

Most people in my profession have gone part-time to avoid the 100k threshold where you lose your personal allowance, as well as the child-care.

The threshold for child benefit is much lower. At £50k you pay a sliding charge on claiming it, at £60k you can't claim it as all child benefit would be eaten up by the charge. So I wish our income was £123k, it definitely isn't 😂

That said, Re: your comment about our budgeting- it's just a combination of events really! We bought a fixer upper house that needed everything doing to it just before Covid hit - at which point all trades and materials rocketed in price (and still haven't come down). Then the recent mortgage rates hiking up means our mortgage is now £500 more a month than it was compared to what it was when we last locked it in. We live in a part of the UK where childcare is very expensive, so three days a week for one child is £1100 a month. Our combined wage might look decent on paper, but we couldn't have forseen the impact of a pandemic, mortgage hikes and ever-increasing childcare costs. We do budget carefully and thankfully aren't in debt, but all "luxuries" are gone and we don't have anything to put into savings at the end of the month. So believe it or not child benefit did make a difference for us. Plenty of people are in a similar position to this it seems.

I fully agree with this but we always to be a small minority on MN.

And I have absolutely no skin is this game as neither me nor my DH will ever earn anywhere close to £100k! Our combined household income is about £50k and the vast majority of my lower salary goes on nursery fees for our 2yo.

I’m a single parent and earn well under 50k so I can imagine it perfectly well thank you. Other than your dodgy maths I haven’t disagreed with you.

No skin either but acutely aware that if we lose a lot of high earners that public spending will be put under more strain. We are at a point where more than half are taking more out of the pot than putting in. If we keep pushing high earners they’ll do what it takes to reduce their wages or just leave for pastures new like Australia. Can’t blame them personally!

Childcare is also extortionate and we are suffering with a declining birth rate. Purely importing people to fill this gap is not the way forward and most likely ends up with them taking out more than they put in as we aren’t attracting many high level skills which end up with high salaries thus more tax.

I’m personally more worried about the high earning women who will decide to leave work completely as working to fund childcare won’t appeal to them. I am one of the women in a good job (not 100k) which is male dominated so I’m a small %, but I’m considering leaving as childcare doesn’t feel worth the job anymore. And frankly the childcare on offer in our area is horrific for the cost.

This takes women out of even more positions of power, independence and decision making for many industries generally. Everything is a domino effect.

I'm a high earner and I moved abroad. Not because of the cost of living in the UK, but I'm glad I moved.

I have two children in nursery full time for about 1100€ per month. And my salary is high enough that I qualify for the minimum level of help from the government. If I earned less I would pay less.

If I were in the UK and paying twice that much, being told I didn't qualify for even the shitty amount of help that the government provides for childcare despite all the taxes I was paying would be a real kick in the teeth.

Loss of free hours + tax free childcare means parents with two preschoolers will be £0 better off for earning £156k vs £100k

Surely no one thinks this is ‘fair’?

Aside from a twin/triplet situation, people are choosing to have two preschoolers.