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.

Yes, people often need incentives to work, other than pure altruism. It's therefore a good idea to design tax systems with this in mind, regardless of whether one wishes it wasn't necessary.

It is actually really hard to get awarded benefits in the UK today, those who really need them and who are struggling beyond what we can imagine (with illness or disability) have to spend hours proving that they really do need support. Do many of those sitting in the House of Lords, and even some in the House of Commons, deserve all that they are taking? I doubt it.

I wasn't referring to incentives to work, I was referring to incentives such as as those which the OP thinks she deserves!

I just wonder if people realise how good they have it on these salaries like the OP's. Many can only dream of having that kind of annual salary.

there’s no nuance to this though. I don’t earn 100k but anyone wanting to buy my first flat would need to earn more than that to afford it & my childcare was cheaper. I don’t begrudge my neighbours who are much higher earners than me (GP & teacher) getting CB or free hours as they likely have a much bigger mortgage than me.

Just contribute more to your pension to get your taxable income to below £100k. If you earn more than £140k in a financial year it'll be more tricky because of the maximum pension contribution limit.

NRFT but it's also £100k limit per parent, so you could have a household income of £198k (that's £99k total taxable per parent) and get your 30 free hours per child and tax-free childcare.

The OPs situation is also one of incentives, though. If a person is going to lose access to a benefit or service by working more, such as 30 free nursery hours, that's a potential incentive to work less.

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

OP - are you in the 60% tax trap income threshold?

But there is a limit. How much tax should someone earning more than £100k pay? Because if you have 2 kids in nursery in London, anything you earn between £100k and £130-ish k is being taxed as OVER 100%. You have to pay money to ‘earn’ more. What op is saying is that she doesn’t think that is fair. She is correct of course!

To be fair those on UC would lose out a lot too in that situation due to the savings limit.

If you're paying tax on your benefit, it's not your income. And there's plenty out there who take more than they give. Also what I'm saying is if everyone takes, soon there won't be anyone to give.

Yep, which is another perverse incentive. People don't seem to realise just how many of those we've managed to sprinkle throughout our tax and benefits systems.

The economic benefit of having more people working and more children being born would far outstrip the short term cost of letting people pay for childcare out of their gross salary. But then we do have a very short termist government.

We also have a government that let's you write off the cost of a personal chauffeur against your tax bill as a work expense but not the cost of childcare in work hours. So there you go.

MP salaries are very low given the hours they spend working and the general responsibility of the job. They’re on £86,000.

And it depends what benefits but in many cases it isn’t that hard. You don’t even need to be made redundant to claim. The threshold of who ‘really needs them’ used to be people who were unemployed through no fault of their own - redundancy or severe disability. Now it’s people who don’t want to work because it ‘doesn’t fit in with the kids’ or because they’re depressed. It’s massively lowered, there are shades of need but if you try to argue this you just get called every name under the sun.

Right, well as long as it's seen in the same light as those on lower incomes who choose not to work because there's no incentive due to appallingly low wages?
Oh, you don't think that's the same at all? Thought not.

Lots of things aren't fair though, that isn't an argument.

3.5 million people claim UC and do not work at all. That’s 1 in 10 people of working age. That’s very high.

Again, it is actually quite hard to get benefits.

Ah right, we've entered unabashed benefit bashing territory, that was inevitable i suppose.

Not really. The only requirements are that you live in the U.K., are of working age, but are not working, and have less than 16k in savings.

To coin your phrase, ‘that isn’t an argument’. I stated a fact, am I wrong?

I struggle with the concept that £100k isn't rich.

I think the principle is exactly the same, yes, and have given multiple examples of where it also applies to lower earners in this thread. Over the last couple of pages, in fact.

You know what they say about assumptions...

Didn't you say most people on UC don't work? Seems like most do then.

You can actually be working and earning quite a lot whilst still being entitled to some UC. You just need very high rent and childcare costs. There are 40% taxpayers who are on UC, albeit not that many of them.

@fonfusedm Would be nice if the country could afford to offer universal childcare, but it won't happen unless / until we raise taxes to pay for it. There isn't a magic money tree

I think we need a wealth tax, at a low rate only payable on huge assets. So, would be easily affordable for those liable and would raise £££. But Rishi and his pals would probably just siphon their asset off into overseas tax dodges to get round it