"Cliff edge for those earning over £100kpa" What does this mean? Is it correct?

[ivs]

I've seen a few posts where people have claimed its not worth getting a payrise after 99k, as you will effectively have a pay cut due to taxes.
Is this correct?

I went on a take home salary calculator (with no additions/changes to the basic set up) and this is what came out?

Are the posters who have made the claim correct? is this wrong?

99k
take home
67,223.40 (5,601.95 monthly)

101k
68,183.40 (5,681,95)

110k
71,603.40 (5966,95)

130k
79,932.40 (6,661.03)

150k
90,532.40 (7,544.37)

Imagine!

At the lower threshold pretty much all my colleagues are either working PT or paying loads into their pensions to avoid losing child benefit. Why wouldn't you when your effective tax rate becomes 67%? Makes much more sense to put it in your pension or spend more time with your kids.

People earning that much money can easily afford to pay for their own childcare.

They are also paying for your childcare.

People earning that much money can often easily afford to drop their hours a bit. Which is bad news for the Exchequer, and also for anyone who might need whatever service they provide.

The vast majority of people in the country pay less tax than they receive in benefits and services. Rather than complaining about the people with high but not astronomical salaries who are paying high levels of tax question maybe you question the people who have the kind of wealth that means they end of living off investments and paying far lower rates of tax.

If you were offered a job and they said to you "we'll pay you 99k OR we'll pay you 100k but you'll have to pay 17k childcare costs" what would you do? (Someone above gave the 17k figure)

Although it's true that the Tories could have changed this, they didn't introduce it. It was done in 2010 under Gordon Brown. According to Wikipedia, under Brown, the tax code, the standard guide to tax, doubled in length to 17,000 pages. He was an arch-tinkerer, introducing so many complications as Chancellor and then PM.

I thibk there issue was pensions lifetime cap? Ie their pension had "enough" in so couldn't have more.

As a person with no kids the £100k barrier isn't as bad. You earn £1000more and get £380 or so extra cash (60% tax and 2% ni)

So it's the taxfeee childcare that creates the main issue. And child benefit withdrawal at 50k level.

I encourage anyone at work in those position to pay more into pension to get a big boost to that. Most do.

I don't expect anyone to feel sorry for us - we are very comfortably off. But I do think the system is a bit crazy.

Childcare is a short term issue for everyone. Not following your logic OP.

You lose free nursery hours and your personal allowance so you can end up actually financially worse off if you have kids in nursery.

the child benefit cut off is now from £60k so a bit better.

Tax free childcare is until they are 11 years old.

not really plenty of people without DC, plenty of people who decide one parent (normally the woman) stay home and dont pay for childcare

I'm not 'boo hoo' ing because I am jealous of others having a high income or because I don't understand the issue as a couple of posters have said.

I save the government vast amounts by being an unpaid carer twice over and by also working in a public service job paying a fair proportion of tax. Unfortunately my pension probably has suffered as a result of working part time to fulfil my caring responsibilities. So yeah maybe I would like a bigger pension actually.

I just checked on the site and it does it automatically for you. So, if you put in a figure over £100k it automatically reduces the tax free amount to give the right answer.

@PotatoPudding i meant that i don't see why there should be a distinction for higher and lower earners. I am in this bracket and salary sacrifice down. Frankly i could do with the extra money i am sacrificing away every month - but it makes no sense as i would actually be worse off every month by the time inhave paid nursery fees until over £135k. Its completely rubbish. I am due a 20% bonus which is calculated on the hours i have worked. To qualify for the full 20% i have spent most of the year working 70 hour weeks otherwise i wouldn't have done enough hours to qualify. I won't see a penny of it now - all going into my pension which is pretty demoralising.

the current childcare tax relief was introduced by the Tory government. Around 2017.
When it was originally proposed the income threshold was proposed at 150k (and consulted on) but that changed in a later draft to £100k. This was several years ago and the effect of fiscal drag means that there are now many more people than there would have been who receive no tax relief for childcare costs from the government at all.
As an additional point which I don’t think has been mentioned this threshold is tested on a household basis. This creates the unfair situation that a family with one high earner earning £100k and another for instance on a low salary receives no childcare tax relief. Another family with two earners earning £99k each would benefit from the tax relief.
This disproportionately negatively affects women who are more likely to earn less to start with and as a result may be more likely to take more time out of the workplace as it may appear financially unviable to return.
This policy also seems at odds with the concept of independent taxation of women and men in couples which was and still is very important for women.
The previous childcare tax relief was universally available to working parents regardless of income levels.

This it's a total PITA untill out the otherside ( over £125,000).

Well how about you encourage politicians to give free childcare to all parents because - if you do actually understand the economics of it - this will increase the nations tax take, giving the government more money to spend on things like your pension? Yes it sounds perverse, but yes it’s true. Encouraging higher earners to work more hours benefits us all.

But then you can just increase pension contributions accordingly.

As people have said it’s about the 100k cutoff for any sort of benefit for childcare. My base salary is in the 70s, but with overtime I’ve pushed it up to the 100k mark before.

the difference between earning £99k and £101k was about 5 shifts, except it would cost me about 10k/year for the childcare loss. So it meant that when we were short staffed and my boss asked me to cover, I had to say no unless he was prepared to pay me £10k to cover the shift…I ended up doing it for TOIL.

There are always options of increasing pension payments, and other tax efficient methods of spending your wage which are worth considering (and are especially worth it if you can fall into the theoretical 60% tax bracket) but honestly if I’m being asked to work I don’t want to be worse off for having done that work.

I’d rather negotiate to work a few fewer hours than have a raise at that level. 60% tax means you still earn 40% but it basically means extra hours you work the less you earn per hour! So not worth it. Work less rather than earn more.

They pay for it by not having that extra salary and employer pension contributions, it's not really free for them