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?

But OP's salary isn't £96k, it's already over £100k, but she has already employed legal tax avoidance to bring it down to a level where she can access state support. She's now asking advice on how to keep it even lower so she can earn more and still keep state support - how high should earnings be able to go before we draw a line and say that parents should pay themselves?

Well we already know the answer to this don’t we: £60k. That’s what you can do as maximum offset. So £160k is the highest salary that can mitigate this tax. All perfectly legitimate and legal.

If you earn over certain levels, this is then withdrawn again until you can only save £10k into a pension.

So you think it's reasonable for an individual to earn £160k and still claim state support? I really don't swear often, but fucking hell.

So you think it's reasonable for an individual to earn £160k and still claim state support? I really don't swear often, but fucking hell

I do think anyone should be able to get tax relief for childcare (for the first two children, ie one per parent), yes. Regardless of income, because higher earners pay it back anyway. I am not sure the current childcare subsidy system works but anyone can get tax relief for anything HMRC says they can, regardless of income so I see no reason why reasonable childcare costs should not count too. Childcare facilitates someone working and earning and paying tax.

Whether a Labour government would introduce it remains to be seen.

I'd get rid of child benefit altogether in the above scenario.

You totally miss the point which is that the system needs to incentivise higher earners to continue to work full time while their children are of nursery age.

If you create a punitive tax regime then higher earners will simply take a step back for a while until their circumstances change. Thats not a good outcome for the Treasury.

Or for those of us who need their services.

It has NOTHING to do with my views. It’s the law.

The OP is literally paying for other family’s UC 🙄

Would it be better for them to work 2-3 days a week so they don’t earn as much and get access to childcare ? How would the uk benefit from that ? As it’d be less taxes paid by the employer.

also one person earning 160k shouldn’t get allowance. But 2 people from the same household earning 80k each should they get it?

id love to live in a country where childcare was subsidised like many other countries and access to it is affordable for families. Many women wouldn’t give up their jobs and Hmrc would benefit from it opposite to the current system which penalises you if you are low income (can’t afford) or if you’re high income (no benefits so its better for me to work less).

probably there are things that we spend money on as a country that add less value back to hmrc than incentivising to work

That’s a really obtuse comment. No one said anyone on a £100k was on UC.