Should tax-free childcare and ‘free hours’ be universal?

[Nursery772]

Having attempted to apply for the new 15 free hours for my nearly two year old, I discovered you are not eligible if you earn over £100k.

My four year old also receives only 15 of the 30 free hours for the same reason.

I am not sure if the additional 15 hours from 9 months / 2 years will be income contingent.

Between this and tax-free childcare, I will lose about £12,000 of post tax income in 2024/5 tax year.

This seems very onerous!

Should tax-free childcare and ‘free hours’ not be universal? It is an expense to allow me to work, and I’m paying quite a bit of tax.

Also being applied as a cliff edge is brutal, seems to create an artificial ‘cap’ on the amount parents of preschoolers can earn.

Earning 100k means you get taxed on every single thing despite not being 'rich'

It is a strange move from the Tories to create effective 100% tax rates on higher earners with young children.

Not sure about the 15 free hours as these are funded hours. But you’d think it’d be fairer if tax free childcare was universal. I’m not a high earner though so I don’t have a full understanding of tax on high earnings.

I agree but these threads never go very well.

£100k is a huge amount of money. Im sorry but no, I think there is greater need for the money in other areas.

It's income after pension etc, though. I think the idea is that if you're on whatever results in £100k+ taxable income is, you can afford a tax advisor to help you with this. 😉

Or it encourages the parents to cut their hours a bit, or take unpaid parental leave to bring down to 99k, and the children benefit from time with their hard working parents, without losing out on essential income? Children need parent time as well as childcare. Obviously, you may be earning £100k+ taxable and be working very part time with great quality time with the kids, but that must be the exception rather than the rule.

Much more scandalous is that if you get your taxable family income down to 99k, but neither of you earn over 50k, you get to keep child benefit, whereas a single parent household can have half that, and lose it. That's where the battle is.

At 100k+, sort it out with your accountant.

I see another local nursery has closed down because of the funding. Won't making it universal just make it worse?

It should be universal. Firstly ease of administrating it but also to keep higher paying people at work whilst they have young children. Otherwise, they will cut days or take lesser paid jobs. Given higher paid people contribute the most in income tax (which subsidises lower paid people) then it’s in everyone’s interest. Otherwise, the tax burden is going to fall more squarely on everyone, which I doubt there’s appetite for.

While I instinctively want to agree with you as it is a very good salary, less a basic pension contribution and student loan you might be taking home ~£4,800pcm.

You could spend most of that on two nursery places locally!

But… what’s the purpose of having a childcare support scheme for this expensive period in people’s lives, that prioritises very high pension saving?

That’s a fudge to claim the money, it’s not an explanation for why the system should be as it is.

I think it is grossly unfair. It should be based on household income, not an individual parent’s income. Same as child benefit but that threshold is £50k.

For the Tories, there are ideological pros to getting women to cut their hours to look after the children. I'm not saying they're correct, but it's not unintended.

Plus, are we sure that, if it were gender equal, there's aren't benefits to high earners cutting hours to raise children? I think if a family has enough money, then ideally both parents should have at least a day a week dedicated to parenting, in addition to the weekend. It would benefit society hugely. Much more than needing more childcare places and funding them too little, which is what's happening.

What would the household threshold be?

I do think it particularly penalises couples where one is highly paid and one is not.

Out if interest do you have a partner? What does he earn?

I sort of think that there should be some sort of universal super affordable childcare system in place - so perhaps everyone gets the 30 hours funded for zero cost, then there's a sliding scale of what people pay for the extras + if you're on a lower income then there's other helps available perhaps based around extra curricular / out of nursery support for families.

We're still TTC, DH is on over 100k. I'm not saying at all that we're strapped for cash (although it's all relative!) but what I would say is if we manage to have DC, but have to pay fully for childcare hours then financially in our situation (and a lot of situations I read on here) it's going to be me that takes the time off to look after DC or becomes a SAHP / part time, because the finances make that necessary. If the 30 hours funding was universal I think it would benefit so many women who would be making similar decisions to stay in full time employment or make choices not fully based on the £.

It's ideological. So that the one that is not highly paid stays home. And that is usually the woman.

It's not accidental. They haven't made these rules and thought "whoopsie!"

It's to reinforce "traditional conservative family values" and to get votes from the "traditional family values" cohort.

It's sexist. Not very well disguised.

@Midnlghtrain There must be many people in your situation. Including in professions where we have shortages - teaching, nurses etc.

@pessaryforthepressurey I suppose it could be ideological - but, don’t they ideologically want to tax people less? Seems strange then to tax people at what must be the highest rate on earth during this very expensive period of their lives.

It should be based on family income, not just the highest earner, and tapered not a cliff edge benefit, similar to the child benefit charge. (Which also should be based on family income).

Although it would probably be cheaper to just make it universal than to make it properly fair.

Should be universal, why not?

OP how much above 100k do you earn?

Doing some googling, 78,000 people are currently impacted by this threshold.

This is set to increase by 70% by 2027-8 as a result of fiscal drag.

So perhaps an issue that will become a political topic in the near future as more people are stung by it. As we have seen with child benefit.

@SecondUsername4me my personal income isn’t relevant really, the question is should it be universal or not.

You are a high earner. If you are struggling to get by on that, that's because of your own lifestyle decisions i.e. large mortgage, car finance, etc. Why should you have a lifestyle like that, and get the same free childcare as someone who has to make a decision about whether they can afford to feed themselves AND their child this week?

@Nursery772 It wouldn't be an additional tax if you have wifey at home looking after the kids, as you should? Or just keep paying the nanny you've had on retainer since she was your nanny? Or if you route the nanny's employment through one of your many companies...

You can bet that Rishi etc isn't facing any concerns about how to pay their childcare, and they assume you won't either.

No I don't think it should be universal. Paying tax starts at just over £12K a year. Absolutely ridiculous to say low earners should be supporting free childcare for folk on £100k a year.

Lower earners aren’t funding childcare for higher earners FYI.

You need to be earning quite a bit to be a ‘net contributor’ ie paying in more than you use.