Avoiding the childcare trap

[Difficultquestionplz]

hi! I know there are a lot of high earners in this group so maybe other mums can help me. I am caught up in the 100k childcare trap.
back in the days when my salary was around the 100k mark, I was able to top up the pension, but that was before my child was born. Now my child has turned 3 and was hoping to finally get a little relief but it looks like it’s not the case…
currently my salary is higher, almost exclusively due to sales commissions and I am going to finish the fiscal at 260k. My husband is livid that he loses on benefits because of my salary and I am actually wondering if there is anything I could do in terms of investments that can be deducted that could bring me below the threshold.
I am not using any financial advisor because honestly when I looked into it they wanted to take 3% management fee just to manage the easy bits (pension, isas) and it obviously compounds.

thank you for helping
(please be kind, I don’t come from money, my job is paying well now but also highly at risk due to performance management or constant layoffs mixed with the joy of nepotism, unconscious bias/ blatant sexism of a male dominated environment)

Agree with the recommendation for HENRY Reddit!

My DH earned a fair bit more than you for a few years up until two years ago when he was made redundant. I can tell you now there is no way to bring that income down to under 100k so in some way you need to just suck up the tax. Some years my DH paid 150k in tax.

I worked part time during those years to look after the kids earning 20k, the majority of which I put into my pension. Now that DH is not working it is my time to support us a bit - I have returned to work full time and earn 50K, and now DH is 55 he is taking 20k / year from his pension and we top up our household income with 2% each year of our ISAs investments. He reached the taper on his pension very quickly on his previous income so we diverted that income to ISAs instead, which is great now as it is not taxable.

He is doing all kid wrangling and household chores. I love it.

Our taxable household income is now 50K + 20K. We now get child benefit for 2 kids. The first time we have ever had any benefits.

None of this would have happened so smoothly if we had not

• shared finances
• sucked up the eye watering tax at the time
• spoken openly about concerns and worries with money (my childhood was similar to yours)
• lived a lifestyle much lower than that temporary high income!

Nope 😂 We’re high earners now, but Dh and I had a combined income of probably £50k back in the day before there were any funded hours for working people not on benefits. We still managed to pay our £1000 a month nursery bill just fine. We don’t qualify for anything now (ours are school age, so would be just tax free childcare), but that’s totally okay because we earn well and live within our means. 🤷🏻‍♀️

He needs to be paying into a pension for you. What are your retirement plans if you split up ?

So you read it correctly - he cannot claim them.

Why is your DH livid though? You haven’t really explained?

She didn’t “pay for it”. It’s paid for by the government. She paid taxes, according to the rules set by the government. As everyone is required to do. I’m starting to think many of you on this thread don’t understand how taxation works.
Social protection serves/ welfare benefits are for the redistribution of income and to support those who need a helping hand.

🙄

Exactly. @Difficultquestionplz - why is your husband livid?

Taxation is not about redistribution of wealth. It’s a charge levied to cover public spending and the cost of govt. That inevitably includes things like a welfare system, benefits. Some benefits are deemed universal. Whether we consider childcare to be universal or not is a matter for debate but it doesn’t alter that for the OP, and others like her, she pays in disproportionately more than she takes out. Childcare costs are paid out of taxed income for her and others. That’s a bitter pill to swallow when you’re aware that you’re also bankrolling the childcare for others. Particularly when the system is not set up fairly.

The theshold for the benefit is 100£k. The reason it’s per person and not per household is purely administrative- it would be far more complex/ expensive to administrate per household. £100k itself is high and higher than for most benefits- this is because the cost of childcare itself is so bloody high and it’s to support parents being able to work who might otherwise struggle to pay childcare. You are absolutely not entitled to it which is why you can’t claim it:

Of course it’s to pay for public services ( as I said in my previous post) these Servies OP accesses and pays for. , it is also absolutely also about the redistribution of income, as are social welfare benefits

But this is when it gets ridiculous. I had to give up work for a period to allow husband to progress in his career. We couldn’t make it work and his income was always going to overtake mine. Completely fine and we are now past that window but when you’ve got a person earning £150K and you get nothing but the couple next door earn £75 and £90 and get the lot something has gone wrong. But we can never have a discussion about the inconsistency because as soon as someone sees 6 figures they scream you’re loaded. Go away.

I disagree it’s about the redistribution of wealth.

Well then you are simply wrong 🤷🏼‍♀️. If it weren’t we wouldn’t have a progressive tax system.

https://publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/memo/taxpolicy/m38.htm#:~:text=The%20primary%20purpose%20of%20taxation,include%20redistribution%20and%20changing%20behaviour.

That isn’t the objective of a progressive tax system. It’s developed based on the amount it’s perceived you can pay whilst balancing the risk of tax avoidance / removal of income / assets.

there’s literally no point in arguing with you if you keep insisting black is white. If part of the goal wasn’t to reduce inequality (redistribute income) we wouldn’t have a system where a disproportionate burden falls on higher earners.

Yes? The primary purpose yes- as I said - is to pay for public services.
additionally we have a progressive tax system and a social welfare state which reduces inequality and supports those in need through the redistribution of income (richer pay in more , and poorer pay in less and qualify for more welfare benefits )

Because you questioned whether any higher earners truly combined finances. Whether that money comes from one earner or 2 is irrelevant really, even if one is a "patriarchal" set up.

You also indicated that he was going to lose out financially because you will earn more, because he is financially independent. Which to most married couples, would be a very unusual set up.

Neither of us are higher earners at the moment, but have been...and have always had a joint account that we both had equal access to. We have both had periods of being the higher earning partner as well, but that was never reflected in our spending power or decision making. Out of our extended families of 2 sets of grandparents and 4 brothers/sisters in law I would say all bar 1 set would qualify as higher earners, and they all have fully blended finances.

I did exactly that during my 20 year marriage. We’re now divorced, but money wasn’t a part of it.

Yes, I was thinking this too. For all the OP’s therapy, I think she needs a lot more…. Maybe she will once her husband leaves her for being a miserly scrooge.

I mean the same could be said to you?

If the point is redistribution of wealth then perhaps explain the increasing gap between those who have and those who don’t? The tax rates we have isn’t a burden on the rich. It’s quite affordable.

For context our take home pay as a couple, per month, is £21000. After tax. Now tell me we have a system that focuses on a redistribution of wealth. We do not. We have a system that allows the rich to stay very rich whilst paying a perfectly affordable amount of tax.

It's not a trap, it's a system. This is such a tone deaf post when people are having their benefits slashed.

I don’t think it is… You seem to be behaving no differently from the high-earning husband who makes his wife scrimp
whilst he enjoys his money.

And it seems like your DH, despite not earning hugely, earns enough to put decent money into his pension, so you must be well over the £300k mark as a couple.

It sounds like you still have major problems with money… have you ever watched a Christmas Carol? Because the way you’re coming across, you’re just Ebenezer Scrooge in a young woman’s
body!