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.

@BIossomtoes

Given her houshold is > £95k/year

She is a NET taxpayer. They pay in a lot more than they take out.

That means you don't get to tell her that she is making public services worse.

Those that are "making them worse" are the households on less than £55k (take out more than they pay in) and 95% of pensioners (under £80k).

That would be people like....yourself.

So, care to stop utilising services as you are "making public services worse"?

@ThePeaAndThePrincess

Agreed. The UK should either move to household income for tax purposes, or temove the tax cliffs at £50k and £100k. The US operates with the household income model and it works reasonably well.

The marginal tax rate can be over 20,000% if you accidentally earn £1 over the £100,000 threshold. That is clearly insane.

The withdrawal of the personal allowance is equally a "shoot yourself in the foot" for the UK economy with many of our most productive workers cutting their hours and - like the withdrawal of child benefit - has been shown to reduce overall tax revenues. Increased productivity is the only sustainable way to raise living standards and these policies are having the opposite effect: economic research has demonstrated this is the case.

A single parent with two children in childcare has to earn £150,000 to have the same net income after tax and childcare as a couple both earning the average full time salary of £38k. That's indefensible and completely illogical.

Childcare is also a public good, like education, so absolutely should be universal. It enables participation in the economy, financial independence of women, reduces child poverty, reduces the gender pay gap, reduces welfare dependency right through to women with insufficient retirement funds and impoverished old age.

In addition public services/ benefits that are universal maintain public support. Higher earners pay for their share many times over and subsidise everyone else as they do with the state pension, education, health etc but the fact they also get the benefit of it means they don't tend to object to that. If you make them pay for it for everyone else but tell them they can't use it themselves, that is the quickest way to undermine the service/ benefit completely. It will end up either being scrapped or the threshold frozen (as we've already seen...) so that fewer people are eligible by the year until very few receive it at all. People who suggest means-testing the state pension should take heed!!

So in short, OP: you're absolutely right. It's a terrible policy in every respect: illogical, unfair and damaging to the wider economy. Those who support it are either economically illiterate or the "cutting off your nose to spite your face" type because they hate people who earn higher salaries.

Pretty much every other developed country does, for very good reason!

👏🏻👏🏻👏🏻👏🏻 exactly this

Yet you berated a poster for not wanting to work extra and lose her UC? What is the difference there then between you? Nothing.

A single parent with two children in childcare has to earn £150,000 to have the same net income after tax and childcare as a couple both earning the average full time salary of £38k. That's indefensible and completely illogical.

This is extraordinary and certainly needs to change.

However, in the vast majority of circumstances the children of a single parent with have a second parent who ought to be supporting the children too. IMO child support needs to cover 50% of childcare as well as a general living costs. Unpaid child support should be given to the RP by the state and the government should pursue the money with the same vigour they chase unpaid tax. It is unacceptable that many NRPs don’t come close to paying their fair share.

All the tax is the difference. And the work.

@WithACatLikeTread

The UC poster is DEPENDENT on the state to survive when is a healthy working age human being.

Do you not understand this?

Thats not ok. That attitude is precisely why the UK is so unproductive.

She was employed. I can understand doing what you do but don't make out that it makes you a better individual than the one on a poor income.

Interesting. I claim UC but not dependent on the UC to survive. Might be many the same. I don't see an issue with pointing out hypocrisy of discovering a loophole to claim something you aren't entitled to whilst pushing others to do more work and lose their benefits.

Ii completely agree. Non-payment should result in significant penalties: fines (enforced with confiscation of property/ assets if unpaid), suspension of passports etc. and for continued non-payment there should be prison sentences as for tax evasion.

The amount an absent parent (i.e. not sharing residency) is required to pay should also be raised to something resembling 50% of the cost of raising a child. The "they can't afford it" argument is laughable: then how do they think the resident parent can afford to fund their own 50% share AND most or all of the non-resident parent's share when they are the one whose work is limited by caring responsibilities also? The pittance that is supposedly required at the moment is an insult to children. There should also be a deminimus amount to be paid regardless of income. If your income is insufficient then go and get a job and pay up, or go to prison. This would prevent all of the attempts to underdeclare earnings etc.

That said, many single parents do not have any prospect of receiving a meaningful amount of maintenance. The other parent may have vanished or be dead. The system cannot rely on maintenance being paid and it certainly isn't a substitute for reforming he tax system and putting single parents on a level playing field so that they are taxed the same amount on the same household income as a couple, and receive the same childcare funding etc as a couple with the same household income. It's completely unacceptable that this isn't the case like in pretty much every other country. Why would we compound the inbuilt disadvantage in one person trying to do two roles, by also taxing them MORE? More countries provide additional tax allowances to single parents. It's hardly much to ask to simply stop taxing them more than couples!

Anybody who actually cared about women and children would campaign for this to change. Neither major political party seems to care about it despite them being aware of all the evidence, which is disgusting frankly.

I can't remember who it was but if you are struggling to pay for three kids childcare it sounds like you couldn't afford to have three or do we only say that to low earners?

It may have escaped your notice but there's been significant inflation in the last few years. Salaries have not kept pace with inflation. Many people who could afford their children and planned prudently with a sensible contingency spare have had that eroded and are now struggling to fund essential costs like childcare that enable them to earn their salaries. Benefits, however, have been uprated with inflation and the minimum wage has been raised by far more than inflation over the last decade or so. The personal allowance has nearly doubled in real-terms in the last 15 years. Lower earners have therefore been cushioned against the impact of the last 15 years while higher earners have been carrying everybody and paying Scandinavian levels of tax for Albanian levels of public services. Which apparently they shouldn't even be allowed to use, anyway.

This.

"while higher earners have been carrying everybody and paying Scandinavian levels of tax for Albanian levels of public services. Which apparently they shouldn't even be allowed to use, anyway."

@ThePeaAndThePrincess is spot on!

Frustrates me that no one seems to understand this..!

So, care to stop utilising services as you are "making public services worse"?

I don’t utilise many public services. I pay for my own healthcare and obviously I don’t have children in education (nobody with kids in state education is putting in more than they’re taking out, use of healthcare is also concentrated in extreme old age and childhood). I don’t use social care. So my use of public services is basically using the potholed roads and having my bins emptied.

I’d also be interested to see the working for the income figures quoted although I suspect they have, as usual, been plucked from thin air.

But the Tories want women to go back to work?
https://www.huffingtonpost.co.uk/entry/ministers-rinsed-over-plan-to-woo-mums-back-to-work-with-letter-writing-campaign_uk_63d24cbee4b0c8e3fc7c52b0

When the minimum wage and benefits get increased though so does everything else and obviously you will be less affected than low earners. You also know that childcare years are short and you will have a significant amount of your £100k plus salary free again in a few years unless you are planning on private school. Those on minimum wage will continue to struggle.

You are being deliberately obtuse. It’s a small number of families that are losing their personal allowance plus childcare help (free hours & tax free childcare) when they go over a certain earnings limit. Some of it immediately & some over a slice of income. Tax & NI on that income is 42%, the loss of personal allowance on that slice increases marginal rate to over 50%. If you have 3 children in child care you lose up to an additional £6,000 a year for tax free childcare and ~1,700 subsidised “free” hours. On an individual basis it can amount to losing net income on a payrise or bonus which is significant. On a countywide basis it isn’t going to be what makes the difference between funding a service or not. I don’t earn that much and I probably never will but I struggle to believe anyone truly thinks that the current system is sensible. There are equally stupid rules around universal credit thresholds and other points where increasing income doesn’t make sense for individuals. Removing them would be fairer and modelling suggests it would also generate more tax revenue overall (which in turn funds better public services).

For what it’s worth I actually think the person on UC who doesn’t want to increase hours as it will make them worse off is exactly the same as my husband and I shoving extra money in our pension & taking unpaid leave to avoid losing child benefit or @Oliotya‘s husband putting extra money in pension to avoid losing tax free childcare. All these behaviours are a direct result of the way the tax/benefits system is structured and I would never blame an individual for doing what makes sense for their family. We almost all do it (whatever our level of income). Even though we benefit from the current set up I also strongly agree the way benefits/taxes are structured at a household level for some things and an individual one for others drives a lot of unfairness for single people and in particular single parent families (mainly women - might that be a reason why we haven’t fixed it?)

Pay no heed to her. She took issue with me years ago. I could tell her water is wet and she'd argue about it.

@Oliotya Who is that directed at?

Oh sorry, quoted wrong. I was on about blossom being obtuse.