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.

I have read that 78,000 workers are thought to be impacted - combination of income level plus preschooler.

I don’t know what % of those will be salary sacrificing to get under the threshold however - or if this includes or excludes them.

Childcare/early childhood education should be affordable for every family, whatever their income level. In my country you pay on a sliding scale according to how much you earn so everyone can afford it, which is the best way (in my opinion) to do it. No one should be unable to work because they can't afford childcare, that puts women especially in a difficult position, forcing them to be financially reliant on their partner unless they have a high enough paying job.

The current system is ridiculous. I earn a very good salary and managed to get it just below £100k with maximum pension contributions when my DC started nursery.

I was then awarded a £20k bonus which meant I moved back over the £100k limit.

I was taxed at 62% on this 20k and also lost my funded nursery hours at the same time plus the tax free childcare savings option.

The net result was that I was actually worse off for receiving the £20k bonus than had I not been given it at all.

You can argue all day long about the relative merits of where thresholds should lie but there surely can’t be any circumstances where the mother of a young child is awarded a £20k bonus and doesn’t retain a single penny of it. How is that incentivising people to work?

£100k after tax is ~£4,800 after tax, student loan, auto enrolment pension.

You might be spending over 80% of that on childcare.

Why is £100k where that line should be drawn?

It shouldn’t be possible that you can be worse off by earning more - especially as much as £20k more.

Ridiculous.

Nobody out of work needs free childcare before school. Only working people should have free childcare and it should not be means tested. This country penalises work and being middle class.

Wow, there’s only £1000k difference between a £60k salary and £100k salary per month!

These threads always get a load of hate. However yes its fundamentally wrong to have a system where if you are on £99k, and have more than one child in childcare, you're fundamentally worse off with a 5 to 10k pay rise, than if you'd not had that pay rise. I can understand if you're no better off, but to be actively worse off, is wrong, and is going to result in a change of working behaviour (such as dropping days at work etc) that are counter productive for the economy.

The difference in take home pay is £1,288 on a £100k and £60k salary.

IF, the £100k earner has a student loan and the £60k does not.

That would almost cover three days a week for one child under 3 at my nursery.

The impact of student loans is quite significant - another problem which will come soon to rear its head.

When I had kids in nursery and was self-employed I thought it was ridiculous that if I had a chauffeur I could write the expense off against tax - but not a childminder or nursery. The system just isn’t set up to recognise that working mothers are a thing.

It's not free for a start.

And it doesnt even begin to cover the real cost of providing childcare.

You can afford it and it's not forever.

I agree. I also think it should be based off household income rather than individual. Under the current guidelines two parents could each earn 99k and still be eligible, whereas if one is earning 100k and one 12k they aren’t eligible. My husband is a high earner but thankfully under 100k and even with tax free childcare our bill is 2.5k for two children in childcare. That’s a lot of money and he’s taxed heavily. Seems very unbalanced as we aren’t wealthy by any stretch

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.

It is when you’re not paying thousands on childcare. When childcare is maybe £4k for 2 kids, plus mortgage, there really isn’t much left. Think about it and do the maths. People just hear £100k and think they would be super rich, without breaking it down. And as had been pointed out it doesn’t make sense for the country either.

If you earn over £100k, you are in the top 2% of earners. I think it does not need adjusting given it benefits 98% of earning parents. It just so happens so many on MN earn the holy grail of the golden six figure salary and want funded childcare hours.

Given the state of public services, I can see many areas that needs an injection of fund and there’s a whole long list that needs prioritising before this.

I am not exactly sure but if I understand correctly Germany and Poland work this way. Pre-schools, schools and universities are free for citizens.
However, whole educational culture is different i.e. public (on the continent private) schools are not as big percentage of the educational market.

we’re in the same boat, and I think it’s very unfair. My issue is not so much that earners over 100k don’t get the help, but how unfairly it is applied. Two earners on 99k each get the help, a single income household on 100k doesn’t, and starts to lose their personal allowance etc. the thresholds also haven’t moved in years, so more parents are being caught by this, especially in London. Given the likelihood the man will be the higher earner, I’d argue this policy is likely to compel more mums to give up work because paying for full time nursery is around 19k a year - which is a huge amount of money. I’d also argue that the variation in the cost of living makes the universal nature of this cap unfair (also for the child benefit cap). Lastly, I have reservations about making so many benefits earnings dependent, as the more you exclude people from state benefits, the less they are invested in those. There are also probably not that many parents of nursery age children on 100k salaries, so I suspect the cost to the government would not be so high. We also need to consider whether it’s really a good idea to disincentivise high earners by taxing them so highly.

And then what is your justification for the rates the likes of @Charlie2121 , where they received £0 of a £20,000 bonus because of this cliff edge.

Is that just fine then, only a few years of it? Actually losing money if you get a mid year bonus or promotion?

Im amazed only 78,000 people are affected by this, as it feels like there’s a new thread on this every other day..

Also I'm not sure if people realise that nurseries in London can be double in other areas of the UK (with more weeks closures). Our nursery in another UK city was circa £1k a month, closing bank Holidays and the week between Xmas and NY. Everyone I know in London pays at least £2k a month per child (and have a week shutdown over Easter, two weeks at Xmas and 2 weeks in summer, which means the cost of family holidays are also substantially more). £4k a month out of your take home pay, is insane.

So yes £100k is a hell of a lot of money. But it's still possible to earn this and pretty much be breaking even after childcare costs have been paid.

I would assume that’s because of a few factors:

• the introduction of 15 free hours from age 2 meaning people are impact and also discovering they’re losing more income if multiple kids
• Fiscal drag meaning more families are being pulled into this problem (due to cliff edge at £100k with 60% tax).
• The shock of discovering you are being taxed at over 100% on a large sum of money for earning £1 over a threshold is definitely a conversation piece
• Mumsnet’s user base

In Scotland everyone is treated the same for the funded nursery hours and gets 30.
It should be like that all over. Other countries have lower childcare costs and it makes for a better society with working parents. Here it seems everyone wants your last penny.

No matter what you make there will be struggles as with bigger incomes there will be more outgoings in most cases.

Why not? Many single parents would struggle to apply for jobs if they are having to try and keep preschool children at bay (especially if their only access to a computer is at a library). Sometimes they need to be able to get medical appointments that aren't suitable to take young children along to and they don't have anyone else to leave them with. Maybe they need to have a break before they have a breakdown working 24/7 looking after their children. Sometimes its just best for the kids to have a couple of hours at a place with activities that their parent(s) can't afford to do at home so that they can learn new things and make friends and start to be ready for school.

We don't live in a perfect world, but we should be trying to help all children, rather than letting those with parents you don't approve of fail in life.

I wish that free childcare was universal regardless of income to help those who are being financially abused to be able to start earning their own money and be able to separate from their partner without being made destitute or staying as that's the only way to keep a roof over the kids heads.

Im amazed only 78,000 people are affected by this, as it feels like there’s a new thread on this every other day..

It doesn’t impact us, our kids are teenagers, but I still feel it’s wrong and needs changing. It’s possible to care about issues that don’t directly impact you.

This is the same for those in Scotland, nurseries from 3 are 30 hours. This will be given to 2 year olds in due course.

University is covered for Scotland residents at Scotland universities.

@Teder

Why do people always make this mistake?

Public services would IMPROVE if you subsidised childcare properly because more people would work.

More work = more economic acitvity = more tax revenue

Thats tax revenue that could then go to public services.

This is basic economics. Have you folks not learned this in school?