£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!

We’re going on a nomad visa and keeping our UK based jobs. Nursery is less than £600 a month over there, so it makes financial sense for us

Yep it sucks, i’ll get hounded for this but £100k isn’t a high enough salary to just lose every bit of support available.
Definitely top up your pension to get you under £100k and submit a self assessment tax return to confirm this each year.

We are in the same situation, I’m the lower earner and I earn barely anything once childcare fees are paid, it was a big discussion about whether or not to be a SAHM but i deciddd to go to work for very little pay for the benefits of continuing work

in our area (just outside London) there are a lot of SAHMs for this exact reason, to earn more than nursery fees you need to be on around £40k just for 1 child and a lot of people don’t want to have their child at nursery fulltime just to take home a couple of hundred exrra a month if they can afford not to but it’s taking a hugely skilled workforce out of the work place

Ah yes, the digital nomad visa comes with tax breaks if I remember correctly. Good luck with settling into a new life. 🙏

Some people are very, very stupid. There's no arguing with stupid.

Just work less and spend more time with your beautiful children. Chances are, you won't regret it and you won't be financially worse off due to our idiotic tax system.

News not just in: in Scandinavian countries poorer and middle bracket tax payers pay vastly more tax.

Nope, it's not 'low earners'. A household can have 2 x £99,900 earners and still qualify. We have an idiotic system with a fuckwitted cut off that disproportionately fucks over single parents. It's not a remotely moral system, so trying to attribute a moral aspect to people playing it is always going to fail.

It's really unfair you don't get tax free childcare when you pay so much tax

So is the means testing for the 30 hours funding? If they are basing their calculations on not getting one, they won't get the other either?

Yes, but if they are able to get adjusted net income under 100k they will get both.

You act like the only worthwhile 'hard work' jobs where people need to be 'intelligent' are in finance or something 😂 Ha.

Try working with the most vulnerable people in society, see how long you last and how your perspective on what constitutes hard work changes.

It doesn't say "Oh here's this thing we've made up specifically for parents of nursery aged children" though, does it?

If a rich person (yes, 100k+ a year in the UK is rich, Google it) is using this loophole specifically to access free childcare, which they do not need, which costs the government BILLIONS, and then once their kids start school they conveniently don't use this loophole anymore... Then yes, they're taking advantage of the system like those committing benefit fraud. The difference is, low wage workers actually need it.

Well you've got your wish, because only working parents are eligible for 30 hours free childcare. All children from age 2 are eligible for 15 hours only. And by the way, the unemployment rate is 4.4%, which includes disabled people. Are you happy to see the children of disabled people have no early education at all?

I'd love to pretend to be shocked to read something so out of touch.

The free childcare hours should be tax deductible for those over 100k. It should not be an all or nothing cliff edge. That makes it a disincentive to work extra etc.
As these people are largely completing self assessment anyway, they should be able to make suitable tax deductions. That would be a reasonable compromise.

What you do not seem to be able to understand @DonnyBurrito is that it is in society’s interest to encourage smart rich women to have children and ideally at least 2, and not the opposite. There has to be a way to make this work in fairer manner. The life provided for the children actually born is easier for those children if they are born into higher levels of familial education and wealth. This is not about feeling sorry for people but doing what is in the best interests of society, in the long run. Just go look up what other countries do to deal with the falling birth rate. It is definitely not discouraging successful people from having kids, full stop.

It does raise the question ‘what am I paying so much tax for’.

Thank you for your replies. I think it might make sense for me to:

• go to four days a week and reduce overall childcare bill
• Put £50-60,000 into my pension to keep me under the £100,000 limit
• Claim the additional £16,000 childcare support

This will leave me fractionally worse off in the short term, but putting £100,000+ into pension, on less hours.

Situation 1 (earn and pay childcare cost) I end up with about £20,000 in extra net pay over the year.

Situation 2 (part time and pension to £100,000) I reduce my childcare costs by ~20% and get the free hours and tax-free childcare (worth about £25,000 a year collectively post-tax). This means I’m about £10,000 ‘worse off’ in net income.

But I end up with £100-120,000 in my pension. And I work part time.

Now to see if I can get my employer to agree - and hope they don’t write me off for coming back part-time when I previously wasn’t going to.

So you just put £40k into your pension each year, and then you can have your cake and eat it. I get that it’s annoying but (a) it’s temporary, and (b) it can be/could have been planned for, so I don’t have to much sympathy (and I say that from the same boat).

This will (I think?) cost the government about £56,000.

£40,000 in lost tax. And the £16,000 in childcare on top.

The government would actually generate more revenue from me, by letting me use the tax free childcare scheme and free hours.

@FrightHorizons in that situation where you'd actually be worse off month to month (although I appreciate you'd have more time with your child), I wouldn't go part time unless I was confident that moving back to full time whenever I wanted would be easy, especially as you say you weren't considering going part time before.

Agree with this.

lots into pension or reduce hours are your only options I think!

I am sahm as husband earns in between £100-£119 which is the pointless zone where you actually lose more than you gain

Why don’t you get a nanny? It’ll work out cheaper than both being full time nursery.

@Job2Do A nanny is not any cheaper than a nursery in London, unless you can house them - and we do not have space unfortunately.

So your FT salary is £200k? I mean, well done, that’s great and I expect you’ve worked hard for that, but in my view you don’t need childcare funding from the state - sorry.