£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!

I'm a high earner and need the free childcare hours. Mainly so I can continue to work, and continue to contribute 50% of my salary to that tax payer money pot you're talking about.

It's not a race to the bottom.

I the long run paying money into a pension as an alternative will benefit everyone.
Pension money is invested and earns money for the country every single year.
It doesn’t get put in a shoe box at the bank and left till it’s drawn out by OP.

What a load of crap. Really?!
She Is a high earner and pays huge amounts of tax already. The system is the issue. This is someone who is a net contributor, unlike a large % of the population.
Paying into a pension ensures that she can afford (without help from the state) to look after herself in to retirement and beyond. It’s also invested so a win all round.

I never realised until MN how much well off people moan about not being able to claim free stuff from the government

Pension money, if invested in British companies, helps everyone!

Basically, current system is maximise your pension contributions for the very expensive childcare years/work compressed hours, later on consider ISA contributions as that form of saving may give more flexibility to take out and retire early, long term. If the products stay as they are. It is up to 20k in an ISA once older one is at school. It is also where you can save for DCs uni fees as they get an ISA allowance too.
In your boat, you have to financially and tax plan everything if you want optimum output. It is difficult keeping on top of all of this with a busy work schedule and young kids, but well worth it in the long run.
On the pensions front as well, if it is a SIPP you do need to look into how it is invested to maximise your returns.

Most people take more out of the welfare system - the NHS, schooling etc - than they ever pay back via their taxes. I think you have to earn around £45k a year before you break even on the amount you take out of the system.

High earner pay a high proportion of their salary in tax and end up subsidising everyone else.

You might still think it's unfair some earning over 100k can get free hours - but their money is basically paying for everyone else anyway.

The harder you work the more you loose. Hit 125K and you also loose your tax free personal allowance then add in commuting costs, a nanny because afterschool care hours aren't long enough (paid out of post tax income, whose tax you pay). Im not sure its paying to work

I don't think you will be eligible for tax free childcare if you earn over £100k

What you get back varies wildly as it should Someone born prematurely with significant difficulties that requires multiple surgeries and SEN support at school can cost a fortune in taxes before they even pay any tax. But we are a civilized society who does not just condemn babies to die if they need medical support.

And generally when you have children, you get back more than you pay in, but when you do not have children, you pay in more than you get back. Education, pregnancy, birth, NHS care for children is all expensive. Healthy adults usually cost only the general costs for road repairs, police, defence, etc.

How is saving for your retirement, out of your own hard earned money 'disgustingly greedy and scroungy'

Because they are doing it to get money from the fucked up system. They're doing it to get 'benefits' of childcare cash.

Someone upthread mentioned about returning to work and not having much cash left over after nursery fees being an investment for the future.
I was in that position several years ago with two in nursery - once nursery fees were paid (free hours kicked in at four) plus cost of travel to work etc I was worse off even working part time but only for eight months when the older DC went to school and then two years later the younger DC was at school. Now they are grown and flown (we'll sort of) I still have a decent career and a reasonable pension.

I mean it's written into the rules that people who work 16 hours at minimum wage can access free childcare and top up with Universal Credit, but there are still people who say they're scrounging from tax payers.

🙄
Don't worry, people like OP will still be paying tens of thousands in income tax to fund free childcare for everyone else. If you don't like the tax rules then go into politics and campaign to change them, don't criticise people who plan their finances around the tax regime.

Go on Nuggetsavings on instagram (they may have Facebook too) they have all advice for mat leave, childcare entitlements etc. they have workshops and advice specifically for high earners too for the funded childcare hours etc.

In many other countries, childcare is universally heavily subsidised as a universal benefit to society, funded via general taxation. Similar to how we fund healthcare or education in this country. It is my view that we should be following a model like that. Why shouldn't the people who pay the biggest tax burdens in this country be able to access nursery education/care for their children on the same terms as everyone else? What else would you restrict from them? Primary school? GP care? Should they have to pay for all that too?

Also it's really irrelevant why anyone is saving anything into their pension. I laughed out loud at someone claiming saving into your own pension is akin to benefit fraud!!! How ridiculous.

Jealousy is a really ugly look.

No one on this thread is saying that and it's totally irrelevant to the OP's situation.

The threshold is not based on earning over £100k but net adjusted income of that amount, which does not include pension contributions.

20 years ago when mine were nursery age, my DH gave up work to look after the children (x2) for 18 months. He then went back to work part time as a teacher and after nursery fees earnt £20 a month... yep £5 a week for a 3 days and that is before commuting costs.

I can't feel sorry for you OP. Some of us never got Tax-Free Childcare and have never earned over 100k combined as full time teachers. I bet you're bringing home more than £5 a week.

It is only for a short time. A year later DC1 went to school and that meant DH brought home £520 a month after childcare costs for DC2... yeh. We both work full time now and bring home 5k a month combined.

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

Yes... but You only have that very high marginal tax rate between 100,000 & 120,000 due to personal allowance clawback. It is very specific to a particular pay point.

I’d love to know how many parents*

By definition not many, as few earn that much.

I am in the same boat op.if it bothers you the simplest option is indeed to contribute a lot to your pension to reduce your taxable income.

I took the view that as a higher earner its on me to pay for childcare

You do have the maths wrong. To have an extra £16,000 in your take-home after income tax and national insurance you need to earn an extra £32k ish to get the. I don't know where the £40k figure you got came from.

If your income is less than £135,000 then increase your pension contributions to bring your taxable income to below £100kpa. Adjust your lifestyle expectations to cope with that income level. Many families manage on a lot less.

If your income is above that level then you can cope with the impact.

OP isn't asking anyone to feel sorry for her. She's basically saying "blimey, this is expensive - if it feels like this for me on my salary, how do others cope?". She's empathizing with those earning less, not asking them to feel sorry for her.

Same boat here OP. We've only got a few more months to go (youngest almost 3), so sucking it up. But it is rather galling. And counterproductive in my opinion.

It's not 'everybody else' that can access free childcare. It's lower earners, to begin to repair the vast inequality in society. There has to be a cut off at some point, and 100k is extremely generous.

I'm not jealous, I'm disgusted by rich people increasing societal inequality by using loopholes to benefit themselves.

To compare paying for nursery (which is for 4 years at an absolute maximum) to lifetime access to the NHS is a false equivalence. Nice try, though.

Between £100-125 the rate is 60%.

This means between £100-140 your net pay is an extra £16,000 a year.