£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!

But there is a cut-off, it's net adjusted income of £100k. Plenty of people earn a lot more than that and send their children to nursery without benefiting from funded or tax-free childcare. And paying pension contributions is not increasing societal inequality. The whole point of pensions tax relief is that it acts as an incentive for people to save for their future.

There is a problem with low wages in this country, but the people on £100k are mostly PAYE employees. They have no say on what others get paid. You are directing your ire at the wrong people here.

In the UK we do our best to decentivise hard work at every twist and turn. I have to chuckle when ‘growth mindset’ is mentioned, we’re an anti growth model, with a benefits system that underpins it. We should offer everyone free childcare, especially parents who have well paid careers to nurture. Intelligent humans kicking around finger painting and baking, whilst very rewarding for some, isn’t particularly productive for the economy. Working parents have to be really determined to work in this country, we openly encourage part time hours topped up by universal credit, whilst those desperately trying to accelerate their higher paid careers are penalised to cover the less ambitious.

I don’t understand why you don’t get an au pair/nanny?

Surely, that’s the cheaper option?

There doesn't have to be a cut off. In fact, a cut off so high may well cost more than it saves.

Would you like some vinegar for that chip?

Oh behave yourself. It’s attitudes like yours which make sure we have a majority population of net takers. We disincentive net contributors from paying tax at every turn. This results in less for everyone as you’ll find when they slash 5bn from the welfare bill.

Income tax is at a 45% marginal rate in Spain above €60k (£50k) per year. Plus there is the equivalent of NI at about 7% on income below that. So whatever you gain by not being on the (stupid) 60% effective marginal rate from £100-120k will be largely cancelled out by the fact that you're paying more in tax before you get to that number.

Also, salaries in Spain are typically a lot lower than the UK, unless you have a way to work remotely while staying on UK money. But then houses are cheaper if you avoid the absolute premium areas. In any case, uprooting your family to a country where (I'm guessing) not all of you speak the language is a hell of a life decision, and probably shouldn't be done purely for the momentary satisfaction of sticking it to HMRC.

It’s not a loophole. It’s the rule. ‘Adjusted net income’. It’s to incentivise people to put money in pensions.
But carry on with your ‘disgust’ if you like
🤷‍♀️

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.

Its not wrong. At 100k to 120k your personal allowance is clawed back. 140k salary gets you about £85k net, whereas £100k salary gets you c. £69k net. So you have to earn 40k pre tax to get £16k after, and thats if you have no pension or student loan coming out on top.

I don’t understand why you don’t get an au pair/nanny?
Surely, that’s the cheaper option

You can't really easily get au pairs now. They were something which existed due to an endless supply of eastern Europeans willing to work for a room & £80 a week "pocket money". It's a heavily abused scheme that was never meant to provide full time childcare for under 5s - it was meant to provide wraparound care for school aged children.

Nannies are very expensive - can be £50k a year which you have to pay from your post tax salary.

85k net!!! Well you can afford 40k+ for childcare and still take home more than most of us could dream of. This is on top of your partner's wage too.

Will you be moaning about the VAT on school fees too?

News just in! Rich people not paying taxes impacts the poor and needy!

🙄

If you think rich people need any help with not wanting to pay their fair share, you obviously haven't been paying attention.

100k salary is not “rich” but is definitely paying more than their fair share into the country whilst genuinely rich people (usually non PAYE) get away with paying very little.

I mean tbf I'd rather the OP got free child care than those that don't even work. At least she is contributing to society.

Oh dear. The issues this country faces in one post.

Sorry, I didn't realise this legislation was specifically targeted at parents of nursery aged children! Can you link me to the part on the .gov website where it states that high earners should contribute to their pensions so they can access free childcare?

Oh wait, that doesn't exist! Because it's a loophole.

Only 2% of UK earn over 100k. She is rich, especially comparatively.

You have to earn around £45k a year just to cover your own costs from the welfare system - your schooling, your healthcare, your state pension. So anyone earning more than £45k is paying for others on top of their own bill (on average) everyone earning under that is paying less than their own bill.

I think you have to think of kids as future adults who cover their own bill as well. So a young child has the school coats, healthcare costs etc - which they contribute back when they start earning and paying taxes

All my wage and part if husbands wage paid childcare. We lived frugally until we got them into school

I knew this thread would descend into the normal jealousy of people earning over £100k.

I can 100% guarantee everyone would be seeking to do the same if they were a high earners

Can you link me to the part on the .gov website where it states that high earners should contribute to their pensions so they can access free childcare?

Well the threshold for accessing it is specifically your income less pension contributions.

https://www.gov.uk/check-eligible-free-childcare-if-youre-working

It’s really quite clear but perhaps have a read to educate yourself. I’d particularly refer you to the section related to adjusted net income.

If the situation was instead "I couldn't vote as a woman so neither should you" then do you feel that is still ok?
Why the hell do we have to pay to work in this country? It's absolutely insane. Do people not want to change this for others going forward? Even if they suffered themselves?

It’s not a loophole. Regulation 14(3)(c) of the Childcare (Free of Charge for Working Parents) (England) Regulations 2022 provides that a child is not eligible for free hours if a parent expects “their adjusted net income to exceed £100,000”

You may not agree with the decision but it is absolutely a deliberate policy choice to use “adjusted net income” in that legislation. It would have been easy to draft it differently if the government wanted to capture income pre-salary sacrifice pension contributions.