£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!

Earn £190,000 gross and you take home £112,000 net

Earn £100,000 gross and you take home £68,000 net

The difference between these two figures is £44,000.

But you also lose £16,000 of childcare. So the difference in earning £100,000 and £200,000 is £28,000 net.

Or a 70% effective tax rate over that income over £100,000. At £200,000 it drops to 68%.

Copying in @MsCactus as challenging these calculations.

I’m saying that losing a benefit is not a tax. OP has the same tax bandings as everyone else earning £200k. It’s not 70%. She loses benefits towards free childcare but there are thousands that are not entitled to it in the first place.

Everyone has different personal circumstances which impact the benefits that they are entitled to.

People talk about the tapering of UC in similar terms, based on the impact on take-home pay. Yes, neither is a "tax" as such but in both cases it's shorthand for a reduction in your take-home pay (with the balance being paid to or retained by the taxman) in respect of each additional £ earned above the relevant threshold.

@ThatGladTiger my OP was about the scenario I face as a result of losing the new free hours offered as of September.

I am specifically talking about the problem of losing that childcare help, and how it is impacting my behaviour / number of hours I can / should work when earning over that £100,000 threshold to maximise my income over the long and short term.

This means that between £100-200,000 I am only taking home around 30% of my additional earnings.

The thousands that are not entitled to the childcare support will be in the same scenario I am in, and probably asking similar questions around how much work they should be doing, how much they should be putting in their pensions etc.

People earning that much and without young children aren’t really relevant to my problem - as you don’t lose the extra £16,000 of support.