£100,000 free hours limit - means extra £40,000 gross income?

[FrightHorizons]

I’ll be going back to work after mat leave in September.

I have two children, one will be 3 in September and the other 9 months in August.

The only childcare scheme I can claim is 15 free hours for the 3 year old.

For the 3 year old, the 15 hours I can’t claim is £300pcm. This is £5,600 inc TFC.

For the 9 month old, the 30 hours I can’t claim is £700pcm. This is £10,400 inc TFC.

This means I need to make about £16,000 net to pay those childcare costs.

This means earning an extra £40,000 gross to pay that £16,000 difference. Is that right?

I’d love to know how many other parents are finding themselves in this situation - nursery fees are now £2,250 a month for the littlest one too (they were £1,900 when the first started at the same age!).

I am wondering if I have got my sums wrong!

Agree. The "higher" earners are unfairly penalised and have to pay all these costs, on top of the 60% marginal tax rare with no benefits in return. Which forces them to think about wats to cut their earnings to save on some of these costs. Pretty stupid. On the contrary, these are the people who should be encouraged to get to work by the government purely for the selfish objective of getting tax revenue from them

It's a bit sad that you want others to suffer going forward as you have.
I am pleased that my company has finally implemented a policy of 6 months full pay for maternity, even though I missed out on it by 3 months.
In any case, back to nursery fees, since my son started in July 2022, the daily fee has gone up from £65 to £85. I had a look and 10 years ago the fee was £50. This is a huge increase in such a short period of time. It's absolutely crippling.
But we suffer on because that's what we must do!

Bills aren't calculated based on the additional gross income you'd need to earn though, so comparing like for like your bill will be £16k won't it?

It depends on how much you make - I think we calculated with one child in nursery that I would need to make £125000+ to make breaking the £100k threshold worthwhile. As it is, I decided to go back 4 days per week, spend more time with the baby , and put additional money into my pension. It’s great they’re providing more support for working families, but the system is definitely flawed. And incredibly unfair to single parents who still lose the childcare benefits after they hit £100k (whereas a two parent household can make up to £200k and retain the benefits)

No suffering, choices made to reflect our income and outgoings, although I daresay there maybe suffering during retirement for those years where there was no choice of being able pay into pension, but I doubt there will be any sympathy for that.

I haven’t rtft but presumably you aren’t getting much sympathy…

it’s actually worse than you’ve put as you also are missing an additional £4k net in tax free childcare on top of the free hours 🫣🫣🫣🫣

I’m in the same exact same boat (x2 children) and cannot get under 100k due to taxable benefits (we need the private healthcare and I can’t drop it) our childcare is almost £4.5k per month with no assistance.

my company are vile and we have been going through redundancies for 2 years now. They are making return to office 5 days per week mandatory and decline all flexible working requests so 4 days is not an option either - all requests are declined.
its FT in office or nothing.

I’ve weighed up my options and all of them are are sub ideal.
We would have to sell our house if I was a SAHM and there’s no guarantee what level I’d go back in at so for now I am sticking with the job FT as the job market is so poor and a new job with a non sleeping baby isn’t a platform for success

But there’s just no way I’m going back and doing a 60 hrs a week again I just can’t with 2 small children.
I’ve decided to stick with the job and suck it up until I find something better later in the year.

the upside is obviously we keep the nice enough house, get private healthcare, have decent pension /retirement ages. Downside is I’m knackered all the time and everything apart from the kids is slipping 🫣 and I worry about the amount of time/ lack of time I get with them.

its the right choice but it does stick in the craw a bit

@Chonk £48,600 is the amount I will pay the nursery.

If I had the free hours, it would cost me £32,600.

My gross pay to fund the £48,600 I need to earn around £80,000.

OP when does your older one start school and will you use a childminder then? They can work out cheaper. Some people also use the 4 weeks unpaid parental leave. Unfortunately none of this is simple. It is best to get in early with good childminder’s once you know where the older one will go to school. Good luck.

@FrightHorizons I get you.
Can you show your workings on the nursery fees per year? I believe you because this is what is costs me but I don't think a lot of people understand or appreciate how much it costs today. It's gone up hugely even in the last 2 years

The OP is doing nothing wrong. The tax system is nuts in this country with massive spikes in tax at various incomes. For people on very low incomes there's a disincentive to return to FT work because of loss of benefits. For mid earners there's a massive tax rate between £60-£80K when you lose CB (e.g.with 3DC it's 67%). For high earners there's the loss of free childcare over £100K. In all 3 cases some people choose to work fewer hours to keep below the limit, reducing productivity. At least for the mid and higher earners there's the option to pay more into your pension, although the government has affected that as well with the removal of the IHT exception on pensions.

What?

You're paying the nursery £48,600
If you had free hours that would go down to £32,600
Either way you'd still have to pay at least 32k

Yes it's a big chunk out of your income. But theres 2 of you in your household (is there?) , and you still have plenty more money coming in.

And this is very short term.

So if OP earns 100k+ a year (a high earner) you're encouraging them to stash money away in their pension so they can get free childcare funded by the tax payer? Despite the fact they can very clearly afford it?

If so, that's disgustingly greedy and scroungy.

OP what do you earn?

There is unpaid parental leave you can take which will reduce your total income for the year, but without you taking any reduction in your contracted salary. You can take 4 weeks a year per child. Obviously it will reduce your income at the time but may be the best long term solution if it's enough (when combined with pension contributions) to bring down your income to below the threshold.

How much do you earn OP? You can put up to 60k a year in your pension. So unless you earn over £160k a year you can still get the free hours this way.

I earn just over 100k and this is what I do - works out with more money in my pocket each month despite putting more in pension.

That’s how the system works - blame the government if you don’t like it. Pension contributions reduce your adjusted net income for the purposes of this eligibility criteria.

How much do you earn? You can put up to 60k in your pension, so if you earn between 100-160k a year you can still get the free hours by doing this

I'm sorry what? How is saving for your retirement, out of your own hard earned money 'disgustingly greedy and scroungy' ?

Honest to God. Posts on threads like this make me absolutely despair. DH and I will never earn anything close to £100k, I barely earn over the personal allowance. However even I can see the system as it's set up now with the £100k cliff edge is absolutely ridiculous and benefits absolutely nobody. And with the low birth rate in this country we should be supporting families, and that includes those who are also net contributors often working in professions that are absolutely critical to the rest of us like doctors.

I got around the financial side by not having children that I couldn't afford!
HTH

You can feel sorry for me if you like as when I had my first baby the childcare cost was the equivalent of 64 hours work a week for me. So 64 hours per week working purely to break even on childcare for one single child before I earned an extra penny for the mortgage, bills, food, travel, absolutely anything else. Amusingly the nursery was only open less than 60 hours a week so you do that maths and see what you come up with.

I can still sympathise with the OP

👏👏👏
well said

Because, @LegoHouse274, she is a HIGH EARNER and doesn't NEED free childcare!

She is using tax payers money to make her already very cushty life extra cushty.

This should be considered benefit fraud, to be completely honest.

That doesn't make sense.

I think it would be better for you to argue that the government changed the rules, rather than that people shouldn't use the rules as written. It's not even a sneaky workaround, it's explicitly in the rules, so I don't see how it could be fraud.

Presumably the government wants people to save for a pension, which is why the rules are as they are, to incentivise what the gov wants.

I agree @Skooled
And whilst the system is better now it’s still not perfect but before this system lots of people like us ( and when our kids were young there wasn’t even the free hours from age 3 ) weren’t able to put anything into our pensions. Neither my dh nor I as we needed every penny to pay the full fees.
Our pensions suffered and yes, I agree, there will be no sympathy !

Honestly, it really grinds my gears when people come on with all their “struggling to find sympathy” and “little violins” when this is so clearly a ludicrous situation. We have productivity issues in this country because of cliff edges like this.
Op, I dropped a day and maximise pension contributions to stay below 100k adjusted net income. I would suggest you look into doing something similar.