£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!

People should be able to deduct their housing costs with agreed rates in certain expensive areas. That would make more sense. Living in a cheaper housing area and earning 100k is very different than earning 100k in London and that is why you get all these weird posts about how those on 100k are rich. Yes eventually if you get on the housing ladder and your house price goes up, as it has been the case historically, but not if you cannot even afford to buy anything or live a rubbish quality of life in a shoe box in a high crime area paying the rest of the country for your supposed privilege.

OP - you earn 200K and expect the tax payer to fund your children. I think you need a reality check and I speak as a person with 2 DCs who was until recently not far off your pay level.
It is a household expense and your DP needs to contribute so it is not just you - he takes the hit aswell. Assuming he earns in the same ball park are you seriously suggesting that a family with a combined income of over £250K should be subsidised by the tax payer?

Kids are expensive, child care is expensive and you are not having an effective 70% tax rate - these are your children - you pay for them, it is a cost of living. Just like flying to see my parents who live in a different country was part of our family budget that my Welsh friends did not have - but I did not expect the tax payer to subsidise that.
. In your situation you would be better off with a nanny/ nannyshare - you and your husband need to pay for the children you chose to have and can afford to care for without recourse to tax payers monies.

You should be ashamed of your entitled attitude

Yeah, I know a lot of people doing this. If you don't have access to family childcare there's not really much point earning between £100-150k or so because you're worse off. The downside is it's potentially going to set your career back a few years but with young kids that's not definitely an undesirable outcome.

It is not just about the money though is it? It is also a question of what type of mother you are and how guilty you feel or not, about spending some time with them. I have colleagues who threw all the money in the world at nannies because they did not enjoy the early years vs others who thought they were the same and totally morphed into baby mamas who could not cope with not seeing their babies/toddlers. It is very difficult to predict and every person has to make a rationale decision not just based on finance, long and short term at that, but also, it is an emotional choice and what help there is from your spouse/partner, wider family to support you through this period, is absolutely crucial too. And I think people just expected to be work machines and burn themselves out with nothing back in return, is not good either.

@Finallylostit but it is an effective 70% tax rate.

I am not expecting the tax payer to fund anything for me - I more than fund my family through taxation. I am fine with putting in more than I take out.

I cannot see the point in the extra day a week for such limited financial benefit however.

I often see posts of people working part time as there is no additional benefit to working full time - this is no different really.

The value of losing that childcare is obviously going to be part of my calculations (as - as it turns out - is needing to use childcare one less day a week).

Any parent earning over £100,000 will presumably be asking themselves exactly the same question.

@Finallylostit Bollocks. Shall we means test access to the NHS? Why not? If you smoke should you pay more? Obese? Shall we pay extra for police? Or should childcare be something we universally subsidise as do almost every other European nation. Not universally funding childcare is taking square aim at successful women who become mothers as the burden falls to them disproportionately. It's a giant flaming bag of shite and nothing to do with being 'entitled'. What a ridiculous accusation.

We cannot possibly tax our high earners anymore if we hope to keep them. This country will not run without them. Taxing people at 60-70% and not giving universal access to ALL services is shameful and causes people to look elsewhere.

There must be a very disproportionate number of people earning just under £100,000.

Yes, the principle is exactly the same as when people who earn less than you wonder if it's financially worthwhile to work full time instead of part time. It's also the same as when people receiving other benefits/services such as UC, child benefit or FSM make that calculation, or when people decide if it's worth their while going over a threshold such as personal allowance or student loan repayment.

What it comes down to is that people have their own personal standard for what's worth working more for, and what isn't. Virtually nobody is persuaded by anyone else's belief that they ought to work more because not doing so contravenes someone else's moral code. People railing at others on this issue just sound thick.

This is a problem that will only be solved by better designed tax codes and systems.

Depends what social circles you're in.

This affects every GP / Consultant in the country at some point, senior teaching staff such as head teachers etc - public sector workers don't have the option of increasing pension contributions either as it's a defined percentage of your salary - one of the reasons productivity in the NHS has gone down.

That is true about the NHS, but at least, they have always allowed part time work and some career progression. Try asking an investment bank or one of the top law firms to go part time pre Covid or even work from home. It just was not an option if you wanted to stay in the game. At least Covid has normalised some working from home patterns which does help women.

@FixTheBone so doctors are working part time, so they can claim childcare hours?

Doctors are not just working part time, many are not picking up extra shifts which they would have otherwise wanted to, because of the oddities in the system. So instead we are all paying the private hospitals instead to shift waiting lists.

@FrightHorizons
they are no difference from anyone else
Their salaries are not that high in comparison to their academic achievements and length of study
They would need to be absolutely at the top of their game to earn the high salaries quoted here and it would take many many years.

Friends who are GPS and a consultant all reduced hours in order to

• make working pay ( as you are looking at )
• in order to be around to pick up their kids

Theres really no difference between us just because they are doctors.

Yes they do have the option. They can pay additional voluntary contributions or set up a SIPP if they want to (although if they are a high earner in the public sector they are more likely to be affected by the annual allowance).

Many are doing a couple of days nhs and then other days in private practice. The pay is higher.

Its not 70% on 200k or anywhere near it. Like every very high earner you cross that band of salary with a marginal rate near to 60% on that portion of salary between 100-130k (taxable).

As a high earner you have the option to bulk out your pension fund to the tune of 60k and receive a bigger subsidy than Jane Doe on basic rate tax. Putting a large sum of money into a pension fund is not a hardship or a pay cut - its a tax payer subsidised investment for your long term benefit on top of the free childcare you aim to keep.

Having been a top rate payer for most of my career I would absolutely support restricting the tax subsidy on pension contributions to basic rate. It has always seemed iniquitous that the more you earn, the bigger the tax payer subsidy to your pension fund. Its the same anomaly which both sides of government described as iniquitous decades ago when restricting other benefits to basic rate. Some of the money saved by the treasury could be used to smooth out that cliff edge between 100-125k and still leave more for the national pot.

Yeah nice one @C8H10N4O2 - apres moi le deluge! How big is your pension pot? And how many children have you personally birthed?

@C8H10N4O2 Say you earn £200k (hypothetical).

Between £100-200k you take home £46,729.

But you also lose £16,000 of childcare.

So you take home ~£30,000 on that £100,000 of income.

Which is an effective tax rate of 70% on that income.

Did you misread my post, I said ‘everyone should get free childcare’. If Labour was to follow the Scandi model of lower and middle tax payers paying more tax (there are lots of these sorts of taxpayers, so would be a lucrative move), we would need free childcare even more. If the highest earning are to financially prop up the most vulnerable, we should make it easier for them to do so.

It's not really like this because:

1. A lot of people nowadays aren't having children

1. Of those that do, only a very tiny number have nursery/pre school age children needing FT childcare

1. Those tiny numbers that have children needing FT childcare and earn £200k ONLY have that expense for a few years in their entire working life AND there are workarounds like the pension salary sacrifice, which means you can keep the money you invest in pension and also get free hours funding

So it's not really a 70% tax rate

*meant to quote OPs latest post saying those on 200k have a 70% tax rate!

It has always seemed iniquitous that the more you earn, the bigger the tax payer subsidy to your pension fund

It's only iniquitous if you view it as a "top-up". Otherwise, of course the people who would otherwise pay the highest rate of tax get the most tax relief (yes, I know that they are likely to pay a lower tax rate when they eventually draw the pension, but that is a key part of the tax incentive, to get people saving).

Restricting tax relief to the basic rate (or putting in place some kind of 30% flat rate to boost savings for lower earners and restrict relief for higher earners) makes a good political sound bite but would be incredibly difficult to implement and administer. How would a nurse/teacher/police officer on a salary of more than £50k pay the excess tax on their pension contributions if they didn't get higher rate relief on the part of their contributions that came from higher rate pay? That's right, it would need to be deducted from their salaries. Ie more income tax on middle earners (which flies in the face of the principle that pension contributions are not subject to income tax because they are not income). Or is it only people like the OP you'd want to target like that?

(Incidentally, arguably the most generous pensions tax relief is the up to £720 that non-earners can claim (they can turn a £2880 contribution into £3600 irrespective of whether they have paid any income tax at all). Now that really is a government top-up!)

If I earn £100,000 and end up with £30,000 after taxes and benefits, how can this be anything other than a rate on that income of 70%?

That fewer people are having children, or that it’s only for X number of years is no relevance - the situation. I describe it what will happen to me under the UK tax system as of September 2025 due to the new childcare provision.

I saw someone else say 100,000 families aren’t able to use the childcare hours so it’s quite a few families.

It's not a 70% tax rate. There's a way to put money in your pension - keep all of that money that is invested - and still get free funded hours on top of all that money you're saving. It's not equivalent to a 70% tax rate where that money just goes. In fact, you end up better off than if you were just claiming the free hours and earning 200k, because money goes into pension pre income tax, so you keep even more of your money