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.

Tax commentators such as Dan Niedle and the IFS make this point all the time, but it would cost money to change the policy and a lot of voters won’t grasp that the economy would benefit from changing this, so it will be written off as a ‘tax cut for the ruch’

I agree that the cliff edge is a ridiculous system and its one of the reasons the NHS is so fucked up. I know a lot of doctors and when this came in a lot of them dropped their hours to avoid it. And don't get me started on the argument of child benefit being based on what the highest earner in a family gets - its the ultimate tax on SAHMs.

Take home pay on 130k is over £6,500pcm. Add in the £1,900 from a partner earning 30k ft, and that's £8k plus per month.

It's really difficult to agree with the argument that any household taking home £8k per month should receive state funded childcare.

I disagree. I earn over £100k and I never have to worry about putting food on the table. Of course I should pay for childcare - it enables me to earn £100k+ so why wouldn't I? It should be for people who actually can't afford childcare without help. I also chose to have kids, knowing how much childcare costs. Otherwise where does it end? Do we give free childcare to people earning £1m/year? I'm very grateful for the free 15 hours. If I wanted to keep the benefit of 30 hours, I would reduce my hours or diverting huge amounts to my pension, so that my taxable income is under £100k. I looked into doing that but it's not worth it unless your salary is only slightly over £100k.

School being free is different - as our school reminds us repeatedly, it's education not childcare (the fact that it is also childcare is neither here nor there). To be honest I'm always amazed that school is free for higher earners. The teachers are fantastic and my child even gets free lunches (in London). We don't pay a single penny for it (of course, we donate to the PTA when fairs and other events are held).

The only thing which I think is crazy is the fact that you can have 2 people earning £99k and they are still eligible, whereas a single parent earning £100k is not eligible and nor is a family where one earns £100k and the other earns £20k. There should be more sensible limits for different types of families.

@SecondUsername4me you have missed the point of the example.

With the pension sacrifice, the government ends up vastly worse off. Less tax. More money spent on childcare. So why are they incentivising this behaviour?

£8k a month is a great household income, but you could happily spend 50%+ of that on childcare locally. And of course what you’d most likely do it have the lower earner stop work, which they might not have done if they had access to the hours / tax-free childcare (as described by a poster above).

When my twins are born and start nursery, we'll be paying £6k+ per month on childcare for 3 children.

I still don't believe we should have any support due to our high income. I think it's right that it is capped at 100k, the only thing I disagree with is that two people earning 99k could still get it.

Exactly. Financially it would have made more sense for me to become a SAHM ad childcare costs us more than I earn but we felt it was better in the long run for my future job prospects/earning potential/pension etc to keep working. But it does feel a bitter pill to swallow to pay someone else to look after my children while I work for free and we receive no government help at all.

Yes!

£8k a month is a great household income, but you could happily spend 50%+ of that on childcare locally

In the case of twins, yes, 50% of the take home pay may very well go on childcare for 3 years (1x year mat leave, aged 1-4 in private Nursery, then into school).

However the vast majority of people who would then be paying out 4k in childcare in your suggestion are doing so because they've chosen to have multiple children overlapping in childcare at one time.

Affordability of when and how many children to have should be something everyone has to consider, not just low income families.

So what if the govt are incentivising funnelling extra into pensions? They need a quick cheap option for the cap, and this is the way they've done it.

Interesting.

Why do you agree it should be capped at £100k, given you will need to earn more than £100k just to fund the nursery bill?

Should there not be some help for parents of multiples?

@SouthLondonMum22

As has been posted:

The State is WORSE off financially due to this policy.

At what point are people going to be rational and objective about the numbers?

The UK is sinking economically-speaking because people keep putting "emotion" over "rational policies".

You folks want to know why Scandinavian countries do better?

They don't put emotion over rational policies when it comes to childcare.

@SecondUsername4me but it’s not a cheap option for the cap, as for any earner between £100-160k they are probably losing tax take AND still funding the childcare.

It might actually cost them money - and, with the extension of ‘free hours’ more parents will start trying to reduce their adjusted net income as the loss is greater than previously.

The main reason why our childcare fees will be so high is because we decided to have a closer age gap. Of course, we didn't expect we'd have twins and 3 under 2 but 2 under 2 was a choice.

To be fair, I wouldn't be against some help for parents of multiples but again, I'm not sure I'd agree that it should be universal.

Make all early years childcare and education affordable and subsidised by government.
No having to apply for stuff.

Nurseries are not just childcare/babysitting it's early years education. My daughter gets so much more from nursery than just childcare, they do phonics and forest school for example. Calling it childcare is just a con to make us think it's not worthwhile investing in.

OP I agree it should be universal, it's children missing out as much as anything else on important formative years.

Additionally the £100k hasn't moved in years, if it had increased with inflation it would be nearer £150k now. Why is the correct number £100k and when won't it be?

I think it should be tapered (like child benefit) and on household income not single earner.

100k is about £5000 pcm. 2 children in full time nursery is easily 3500-4000 in many parts of the country (even more in London).

Lots of people struggle to pay for all housing/transport/bills/food on 1000pcm - it’s equivalent to a salary of under £14k without childcare costs - under minimum wage for a full time job.

@SouthLondonMum22 I think you would feel differently if you didn’t have a husband who want almost as much as you. One person on just over £100k, paying for 2 kids in childcare which is fairly normal, and an average house in London...you wouldn’t have much left.

*earns not want

Yes it should. Really how much money does this save? Given a tiny percentage of the population earns over 100k, and I imagine by the time you factor in women who therefore decide to drop their hours as it’s not worth it (and therefore pay less tax) it works out no different. These women may then decide not to increase hours (or instead spread over to fit round school days) again meaning less tax revenue.

@scrunchmum

This is actually an important point that is often missed by many commentators.

Fiscal drag has also impacted these "adjustments" for higher earners.

£50k and £100k should be around £65k and £125k now with inflation.

So you end up paying higher tax due to marginal tax bands not budging AND you also get hit with higher taxes because the banding for childcare has not changed either.

And lower earners in the UK wonder why people feel "poor" at £100k when they have two kids.

What we need for the UK population is basic math classes. The vast majority seem incapable of doing basic math.

Yes, nursery should be treated as any other educational institution and be universally available and free, as should university education.
The mobilisation of resources to provide such services is massive and requires huge changes, recruitment, training, infrastructure and most importantly political will.

Yes, the £100k limit for losing your personal allowance was introduced in 2010. The only change has been to reflect the change in the personal allowance - ie it applies to more income.

I’m not sure how long the £100k cap for childcare help has been in place - it predates tax-free childcare and free hours.

It’s definitely a situation which is escalating on a number of fronts:

• the cost to those impacted
• the increasing number of people paying it

At least 14 years of fiscal drag.

This makes no sense at all?

Do nurseries and childminders educate children or not? They do, so it’s the same as school.

Make it make sense before you object a fair point raised in a discussion.

I'm sorry but an income of 100k is a huge amount of money (even after tax) so no, I do agree that they need to draw the line somewhere to be able to provide support to those that earn far less.