High earner query - basically over 100% tax on xmas bonus.

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My employer has decided to be very generous and give everyone £5k cash bonus this Xmas (in previous years they have given £2k). I have adjusted my salary sacrifice pension contributions so I earn approximately £96k gross. I cannot amend this until April as per my employer policy. I thought there was enough buffer for bonus and benefits.

problem is if I earn over £100k (I have 2 kids aged 1 and 3 in full time nursery)

• I will pay 60 % tax on my bonus
• i will become ineligible for tax free childcare - worth £333 per month,£4k per year
• I will become ineligible for 30 hours childcare for DD1 - worth £600 per month, £7k per year.

basically because I’m getting this bonus we’ll be much worse off financially - is there anything I can do to avoid this?

I very much doubt employing a nanny would save her money because she would have to pay employers national insurance as well as the nanny’s salary and decent nannies are very expensive in London. We shouldn’t be encouraging anyone to give up work, male or female. It puts them in a vulnerable position, means that the country misses out on their tax and national insurance plus we have a massive skills shortage and loads of vacancies that cannot be filled.

And to clarify, £3800 is the amount we usually transfer to our childcare account each month at the moment, so there is always enough to pay the nursery fee bill. The gov tops that up by £167 per child.

The nursery bills can vary if we have any early drop offs / late pick ups so are sometimes more than £3800. But DC2 is approx £2200 and dc1 £1600 (without extra early/late fees). I will actually need to check with the nursery how much our bill will go up by if we lose the funding, as DC1 should still be cheaper, but when I looked at the fee sheets it looked like approx £500-600 difference.

You are confused, because you've described me as angry and bitter when I'm not.

You've posted insults to others as well as me.

You may want to ask yourself why you're feeling so incredibly cross, why you can't just write adult posts about adult topics.

If DH earned almost 100k, and I earned £30-35k (in a secure role I loved), would people still be advising I become as SAHP due to short term childcare costs for a few years?

Remind me what’s your advice to op? I missed it.

No. It’s fashionable to hate successful women on MN nowadays you missed the memo. I could’ve predicted the responses you got here. People think it is actually ok to be financially worse off, earning more, paying an actual marginal rate of over 100% when all penalties kick in. Shut up and pay your taxes basically.

I'm not the one who has posted in an intemperate manner.

Posts like yours don't win any arguments or persuade anyone.

Confused attacks only reflect badly on the writer.

Well quite. You didn’t come here to offer advice because there isn’t any. There was no argument here. Just a simple post asking for tax advice. People fell over themselves to offer nothing constructive but their hatred for higher earners.

Some people can’t see beyond the short term cost of childcare.

It is almost always detrimental to someone’s long term career to give up work because childcare care costs make it ‘not worth it’.

Hang in there OP. Solve this problem (which is eminently solvable). You’re not wrong that this policy is counterproductive.

Indeed.

Make it Universal Credit however and all sorts of advice will be given to protect entitlements.

Childcare assistance should be universal, the numbers accessing childcare over 100k is probably fairly minimal anyway.

There are more than you might think. If like me you have no free grandparent childcare available you will think twice about having children until you are on a decent salary as the costs are immense.

I’ll have paid around 60k in nursery fees for 1 child whereas friends of mine with 2/3 children paid nothing as grandparents did it all for free.

If I’d had 3 children like some of them did it would have cost me close to 200k in nursery fees. You won’t get near to being able to afford that without a big 6 figure salary.

I’d LOVE to know what you’d do in the OP’s situation!

salary £96k, take home £64k. Get a £5k bonus - yay. Take home pay is up to £67k but lose all nursery hours which costs £12k (guess) so my take home pay is down to £55k. Overall, for taking the bonus you lose £9k take home pay, your entire annual food budget. Would you just suck this up, and say ‘oh but society needs the money more’??? Really???

Yes, there are far too many posters who try to shut down any discussion by telling people to read the room, that their post is tone deaf etc. You can't mention someone's age in a post or you get them all shouting about ageism. You can't talk about diet without the fear of someone telling you that it is fat shaming.
There are posters on here that seem incapable of having a discussion and just start throwing out the same old nonsense to shut down anything they don't like. Other posters get fed up and just don't contribute to the threads. Then there are always a couple of posters on threads like these that have their own little argument that goes on for several pages and derails the entire thread.

'people' may have done that, but I did not.

As I said before, I hope you feel better soon. It can't be fun being so cross with randoms on the internet.

Still waiting for your sage advice. I’m not the one clicking on threads just to wind myself up.

You are not taxed on charitable donations. Give it to the poor

Why such vitriol towards a successful woman? Well done

As someone posted yesterday in this thread before Mumsnet got all woke sensitive - broke bitches be jealous 😂
We need to encourage high earning and see high pay as a positive. Who's tax do you think pays for all the public services...

some nasty people on this thread!
if your employer doesn't permit additional voluntary contribution to your pension you can very easily (on line) oper a self invested pension (SIPP). government will add a 40% tax refund to anything added to Sipp and you can judge your contribution to take you below the 100k threshold at which your personal allowance starts to taper away. you can do it any time before the tax year ends. DH and i opened SIPPs with AJ Bell. V easy - you can keep the money in cash or invest on something with a very wide risk spread like a global shares etf. i recently removed my 25% tax free lump sum as i retired. Was also pretty easy.

For those who don't understand why the issue OP is facing is a real problem for all of us, rather than some kind of just deserts for being successful, this article is a good read:

“Like many of my colleagues I have young children and claim funded childcare hours,” says the thirtysomething family doctor. However, the doctor points to the “tax cliff edge at £100,000”, where if a household earns this much or above it loses this funding.

“This is coupled with the loss of the personal allowance from earnings over £100,000, which results in a marginal tax rate of 62% including national insurance. Factor in pension contributions and student loan repayments, and I would only take home 15.5p for every pound earned.

“I did some calculations and realised that, factoring in the loss of childcare hours and the higher tax band, I would need to earn about £120,000 to ‘break even’ with earning just below £100,000.

“As a result, after Christmas I’m reducing my hours to keep my earnings down. This means at the busiest time of the year for the NHS I’ll be sitting at home twiddling my thumbs when I could be at work seeing patients.”
Reducing hours to stay below the £100,000 income threshold was, they added, “a regular topic of discussion” among colleagues. “It’s utter madness. Apologies to patients who can’t get in to see me in February and March. I’ll be back in April.”

https://www.theguardian.com/politics/2023/nov/21/im-reducing-my-hours-fiscal-drags-impact-in-the-cost-of-living-crisis

Yes, I do wonder whether some of the contributors in this thread have realised that the potential implication of this cliff edge is them not being able to access a service they need.

No. Nobody makes that association, unfortunately they’re mostly waaaay too stupid to come to that realisation.

That, and the govt have basically invented free money for so long that it’s become worthless. Everyone feels entitled to everything free and they’re about to get the mother of all wake up calls.

Did you mean to say "If DH earned OVER 100k, and I earned £30-35k (in a secure role I loved), would people still be advising I become as SAHP due to short term childcare costs for a few years?"

I think a large number of people would still look at your £135k+ household income and ask whether your diamond shoes were a too tight too.

Don't know of anyone on UC on over £100k.