There’s NO point earning over £50k?!

[ThisReallyDoesntAddUp]

Because of the £50k child benefit limit and 40% tax rate!

So I earn £78,000 pro rata overall now with my job following a mid year pay rise. This includes bonus and car allowance. I work 4 days a week (80% equivalent) which brings the overall pay this year down to just shy of £50k with a £9.6k bonus.

Out of the £9.6K bonus due in March, I’ve worked out 40% will go to the taxman, over £2K will need paying back for child benefit as I’m now over the £50k threshold, and a further £800ish will go towards my student loan. Deductions of just under £6k!!! This means I’ll only take home 30% of my bonus?!

I’m now on mat leave for baby number 3. AIBU to make sure when I go back I remain under the £50k mark by reducing hours even further?! I’d then have less to pay in childcare mitigating the difference in the pay I’d receive working an extra day each week.

Its an absolute joke, I was hoping to go back to work after my last baby and push on hard with my career but what is the actual point!! I may as well work less hours, keep the child benefit and pay less in childcare!

Because if you don't earn £60K you probably think it's a fortune and that they have no money worries - but that isn't the case unfortunately. On MN you are only allowed to have money worries if you are on min wage - everyone else is just being wreakless with their thousands!

Can you tell me what the benefit of putting it into your pension is apart from having more in pension pot?

‘lifes unfair’

Brilliant.

Good thing you aren’t a government economist.

Maybe you are actually! That would make a lot of sense actually.

Being able to retire earlier, keeping the child benefit, paying less tax.

Because it reduces your income and so you become eligible for child benefit.

= more money overall

Even if some you can’t access for 30 years.

Yes and now I'm 50 I'll be able to access in 5 years so it's almost like a very high interest medium term savings account.

Unless you maxed out on your lifetime allowance without noticing as happened to a few people when the impact of the lifetime allowance hadn't been fully analysed. I understand they will pay 55% tax on that. Not that anyone cares much for the overprivileged few.

An example of the advantage of paying into your pension. If I earn £10k over the threshold and keep it, I pay 40% tax and lose CB, so take home less than £4k or I put £10k in my pension. It's a no-brainer for me.

I know I will pay tax on my pension income, but not NI and my annual pension income will be below the threshold so only lower rate tax.

Agreed, but making tax 'fair' is the right course of action

60% 'tax trap' is not fair - 40% is
£98k joint household income full CB / £60k single household income no CB is not fair.

If you put cliff edges in place, people actively look for ways to avoid them. This may be working less hours, pensions or other more aggressive tax avoidance schemes.

Have a fair and equitable tax system, and it works for all.

You won’t always be getting child benefit so limiting your career advancement because of concerns about repaying benefits does seem a little shortsighted.

Paying 40% tax isn’t great and I do understand people’s feelings about that. But we all want good public services don’t we? They cost a lot of money.

You have a lot of choices open to you, choice to drop work to 3 days from 4 and spend more time with your dc, choices to put into your pension and retire earlier

for may others working just as hard as you and juggling just the same, they don't have those choices as they earn much less, but still pay the same price for supermarket food, fuel and products. £70 a day here for childcare and going up in April by 10%

20% uplift on the contribution on day 1, with a further 20% claimed back for higher rate taxpayers.

This grows in a tax-free (primarily) environment, whilst invested, compounding the gross roll-up over time. You can then take 25% of that contribution out tax-free, and the rest of the compounded grossed-up sum, taxable at your highest marginal rate.

Down side is the lack of flexibility and age to access, whereas an ISA does not suffer these downsides, you do forgo the grossing up of any payments.

Well, you might be getting it for 20+ years, depending on then age of your children.

They aren't just paying 40% tax - they might be paying more like a 70-80% rate.

Understand where you're coming from OP, more money but more outgoings puts you in the same position.

It's a balancing act. I plan to return to work but yes nursery x2, plus afterschool club 😬

You work super hard, have paid student loans, don't see the kids, and then break even. It's defo a decision if it's worth it.

For me personally yes but I don't claim. Maybe consider contracting. So you can earn what you need to and then take small breaks, giving you some time with kids too.

They won't be tiny forever, and childcare will reduce. Keep grafting hun x

As many other have said - pension!!!

I have 4DC. I am part time and I work out my hours very carefully as I could very easily earn more (my boss wants me in more ideally) but then I take home very little of it as I'm just over £50K on my 3 days. With 3 under school age you can imagine it's definitelt not worth working an extra day.

It’s part of the governments job to incentivise work, and particularly to incentivise skilled work. There is no point moralising that people should be thrilled to hand over 60% of their income after a certain point, or that they should be joyous that they are actually worse off than they were before their pay rise or bonus or overtime due to government policy. The reality is people make choices that make them, as individuals, and their nuclear family better off (which can mean financially or work/life balance). If you say to someone “pay for this qualification, study on your own time after work, sacrifice your cash and free time, take on extra responsibility at work, and at the end of it you will not be even slightly better off except for the rosy glow of paying more tax” then a lot of people will decide to stay exactly where they are. The idea that everyone who “works hard” is entitled to the same salary is disingenuous. A care assistant on a ward will “work hard” but they do not work harder than the band 5 nurse, who has sacrificed earnings to get her degree qualification and has more knowledge and more responsibility AND is working hard, and in turn the band 5 nurse does not work harder than the matron who has a leadership/management role, higher levels of clinical skills, additional qualifications, additional experience and a high level of responsibility AND is working hard. There are definitely jobs that are dossier than others and some low wage jobs do have an enormous physical and emotional toll but we are not in a situation where swathes of the country are bringing home £70-100k for spinning about on office chairs from 10 until 4 with a 2 hour lunch break to sip their expensive coffees in. Generally these earners have high levels of education and qualifications (which they will have paid for), are “clever”, are skilled, are knowledgeable and work long hours. Everyone knows a buffoon who has somehow blagged their way into senior management and everyone knows really bright hard working people who never seem to catch a break but that isn’t an argument for dismantling the relationship between skills/knowledge/qualifications/responsibility/hours and pay. It is an argument towards improving adult education and helping people for whom the “normal” life path isn’t A-level -> degree -> postgrad qualification -> professional qualification -> higher rate tax payer.
There are too many “cliff edges” in government policy, Tax thresholds, stamp duty, CB, free childcare, VAT rates, VAT thresholds, UC threshold’s etc that disincentivise anyone on the border, which is millions of people.
l’m on under £50k, but I tip over with unsocial hours payments and overtime and I works a second job which is taxed entirely at 40%. Everything over £49.9k goes into my private pension. I’m a bit 🙄 that people think I’m a scummy tax dodger because I’m contributing to my own pension.

Minimum wage is over £20k for a standard 37.5 week. Earning £12k a year for “working hard” is not normal. Not sure if I’ve missed the drip feed.

OP - as someone for whom the gas pedal disappeared and had to be built again from scratch my advice would be higher earnings plus higher pension contributions.

Yep ! Dh gets a huge bonus at Xmas and to give away half of it stings .. but ce la vie ! 💃

It's so inconvenient when people point out godawful policy and act accordingly instead of just being sucking it up and behaving in a way that suits the ideological bent of the person who doesn't want it tackled, isn't it! Heaven forbid any of us actually want a fairer and more efficient tax system that doesn't structurally discriminate against single parents.

Heaven forbid any of us actually want a fairer and more efficient tax system that doesn't structurally discriminate against single parents.

Single parents have my every sympathy, they get an incredibly raw deal. There are a number of ways that could be addressed - raise the threshold for child benefit, higher personal allowance are just two. The issue is how you identify them in a way that isn’t an invitation to abuse.

I feel this! I genuinely don’t know what to do as I’ve negotiated a nice pay rise BUT I lose out on child benefit, get taxed 40% and lose most of my bonus as a result so what is the actual
Point! I fear I’d be seen negatively if I dropped my hours as it’s such a male dominated industry and to be honest, I’d really struggle to do my role on less hours. My husband doesn’t bring home half of what I do but works full time too so it just feels like we’re slogging away to get the minimum when I have friends on less then my husband and I but their benefits top them up to practically be in line with our take home 🤦‍♀️

I hate the assumption that the amount you earn signifies how hard you work. Some of the easiest jobs I’ve had have paid well.

Also while it can be good financial sense to put more in your pension be aware of the annual allowance threshold.

Glad you're not trying to apply that 'life's unfair' nonsense to at least some of the people affected by this policy.

If my salary was 50k exactly, after my company pension payments, and adding on child benefit, I'd be taking home £3118.
If I was on 65k, I'd not get any child benefit but would still take home £3742 (after pension contributions).
That's £624 a month extra so there is obviously a point.
Of course if you're paying a lot in childcare, especially if that's for a higher than average number of children, it might be worth dropping hours to save childcare costs. But for your average person it is absolutely worth it.
If I was to be on 78k, I'd be taking home £1250 a month more than if I was on 50k, even taking into account losing child benefit.

Oh, so you aren't actually worse off if you earn more. I'm sure we were told people were.

Honestly, I'd just reframe my thinking if I was you, and say to myself: I earn 50k part time, get loads of child benefits and a 3k bonus. Lucky me.

While I do have a LOT of sympathy for middle class 'wealthy' earners who can barely make ends meet on two salaries with London house prices etc, I don't really have much sympathy for people despairing at having their bonuses taxed when I know so many people working 12 hour night shifts on minimum wage, helping the dying, the sick, the demented, children in trauma, with no bonus in sight.