Anyone else lost a bit of ambition now they’ve been taxed to the brink?

[Peasontoastt]

I used to be extremely ambitious and was really eager to reach some sort of financial security. As a consequence, I’m in what’s considered a highly paid career, I work hard and it took me many years to train.

Just as I paid off my student loan (which took many years), I then had a baby and returned to work to be stuck with the childcare dilemma. I struggled through that phase and have come out the other side but being taxed so much, no child benefit, still paying for nursery even though dd has ‘free’ hours now. It’s likely that savings are going to be bashed next, so what’s the point in even putting anything aside when there’s likely going to be a 4K cap on ISAs.

I used to feel so ambitious and of course I know money isn’t everything, not by a long shot. But having worked my way up the ladder and with huge responsibilities only to feel penalised financially for doing so…what is the point? Yes I have more financial security than someone claiming benefits but equally, I am not being flippant when I say a few years of resting and being at home and being frugal is starting to seem so much more attractive. Has anyone else started feeling this way? I feel taken the piss out of by every financial angle!

One nursery place round here is £2-2.5k a month now.

A £600k mortgage (doesn’t buy a lot locally) another £3k a month.

Thats why people feel it doesn’t go as far as they had expected.

I’m not misunderstanding the problem.

We’re both smart enough, I assume, to have worked out how much those 2 children cost, and the level of income it takes to cover those costs.

You cannot really think that with £5700 coming in each month, it’s justified that someone else pays those childcare costs. Surely.

I am honestly staggered that people who choose to have children, knowing their income means they’ll have to fund their childcare, then require sympathy for the cost that they knew about and can cover.

For which tax payers?

So it’s the childcare costs and the house prices that are the kicker. Not the tax rate. People on a lower income also have to pay childcare costs and pay for a mortgage, how do you think they cope?

Yes, I would be paying 62% tax atm (as tapering personal allowance off). It doesn't feel low to me? Hence me sacrificing sums to my pension to avoid it and get back into the lower bracket!

They are entitled to 30hours funded hours childcare, plus £2k tax free childcare scheme. So arguably their childcare costs are no where near £2-2.5k the PP is having to pay (as she's not entitled).

I am honestly staggered that people who choose to have children, knowing their income means they’ll have to fund their childcare, then require sympathy for the cost that they knew about and can cover.

Yes Yes Yes! Exactly!

Are you staggered about all those people on UC who can't afford children without tax payer bailing them out? or about those bleating about two children cap? who do they chose to have children they can't afford???
Or is it ok for you for high earners to fund other people's children but not being able to afford own ones?

Higher rate tax is very high. Basic rate tax has never been lower. You are generalising.

Back to the OP - which is that because of high tax rates they dont feel there’s as much left to fund their living expenses as there should be.

People on lower incomes get up to £10k a year in childcare support to help pay their childcare.

In any case - the argument isn’t that someone on £100k is worse off than someone on £35k - it’s that the £100k doesn’t deliver anything like the lifestyle they were expecting.

£35k after tax plus child benefit is £2.4k a month. Plus c £600 childcare help = £3k a month

£100k after tax and probably a student loan = £4900 a month.

Almost 3x the income, but only 60% greater take home after tax and benefits.

Exactly. How can people on this thread not understand this? Is reading comprehension really this bad. We are talking of people going from £99k to £104k on paper earning more but in practice having to take a walloping income cut to accept the ‘pay rise’.

Personal responsibility, right?

I think in both cases, someone has had a child they can’t fund, in whatever format that means for them.

I am however far more inclined to want to support someone to pay for their childcare, when they’re not already earning £100k. It’s not envy, it’s common sense.

We help those most in need. Which isn’t anyone here.

A member of my team definitely gets subsidised childcare. She earns a quarter of the incomes we’re discussing here.

It doesn’t take much to work out who is in most need of help, does it?

I think high earners believe they should be immune from a cost of living crisis, because they should be too well off to be impacted.

That’s not how it works. We’re all affected, relative to what we have. I had substantially more disposable income 5-10 years ago, on lower earnings.

Having a higher salary doesn’t make us able to avoid cost increases, it makes us better equipped to absorb them and less likely to end up starving because of them.

I think people object to paying very high rates of tax, to then be excluded from the services they are funding for the rest of society - and, while not being able to achieve the level of lifestyle they would expect.

Frozen tax thresholds mean more and more people are being caught by the 40% and 60% tax thresholds, while their quality of life decreases. This is making a lot of people question what exactly the state is doing with their money - and if they agree with our existing taxation levels.

You have not presented any comment on that fact that after tax and benefits a £100k earner with one child isn’t even twice as well off as someone on a third of that income.

Interesting points made.

I think having a certain income should exclude us from certain benefits. If you’re over the means tested threshold, you (at least officially) don’t need the benefit.

For example - There’s a “family fund” available in our area for children with disabilities, or rather the parents of, to buy them equipment. My partner’s ex wife qualified for it and got my stepson a swing. We wouldn’t get through the means test. Nowhere near.

I’m not bitter about that, we’ll get him a swing. Sure we’ll have to save, and can’t access it as quickly as she did, but we don’t qualify because we earn too much.

I don’t have comment beyond the fact that the higher earner was £1900 better off, and that’s not to be sniffed at. We’re talking like these are small sums of money, and they’re really not. Just seems that that gap isn’t wide enough for some people.

@SleeplessInWherever How do you set the threshold though?

97% of parents can claim childcare help. Two parents earning £99k each can, but a single parents earning £101k can’t.

A parent with two children earning £100-140k might LOSE MONEY vs earning £99k, because they are exlcuded from childcare support. What’s the logic of the threshold? What behaviour is that incentivising?

Taking home an extra £22,800 a year on additional earnings of £65,000 isn’t a great deal. It’s an effective 65% tax rate on that income after taxes and benefits.

You are struggling to see beyond the end of your own nose.

I think it’s a difference in attitude to money.

Being in the unfortunate 3% is actually fortunate, and an extra £22k is still a great deal of money. It’s only £3k off paying a NMW salary.

I do not see how you could be disincentivised by “only” having an extra £22k.

Most. 20% lower bracket. Then 40% higher. So I dont think that's too bad. But a poor NHS servic3 and not great other facilities the money isn't being put to very good use. And all the handouts which Labour has refused to tackle. The money is not being used well. No better under Tories though.

£4,900 a month and feeling hard done to is just absurd. By all means they could drop a few rungs down the ladder to get a £35k job plus the benefits that would afford them if they think they would be better off.

Because people won’t give up their time if they don’t feel the financial benefit is worth it.

We see it already en masse at the £50k and £100k rates due to people avoiding paying the higher rate.

There are countless posts about this every week, as people realise the extra time, effort, stress, training, sacrifice etc etc just aren’t worth it in monetary terms - particularly for those with children.

I’ll try to get this point through one last time. In cutting childcare for those on salaries of over £100k we are not saving the country money! This policy is instead costing the state money. Incentivising people to drop their salaries for a few years while they have kids in nursery costs them in the long run - in long run reduced earnings. It therefore costs the state in the long run in reduced tax take. That reduced tax take is more than the cost of providing the benefit.

@Spartahori it is quite interesting seeing how people fail to grasp the incentives created by tax and benefits.

It also kind of points to how we have ended up with a tax system that increasingly penalises higher earners - as they’re just seen as having more, so they should be happy whatever the situation.

The answer is to incentivise higher earners to stay in UK.

Scenario A
We tax 100 people earning 100k at 30%, we get 3 million in tax revenue. In addition, that 100 are potentially spending their remaining 70k on items and services which they pay VAT on, gaining another up to 1.4 million in VAT revenue, so potential tax take of up to 4.4 million. On top of this, the spending creates jobs, leafing to fewer people on benefits, so also cuts costs to taxpayer.

Scenario B
We up tax to 45%, 40 people leave country/stop working/ reduce hours significantly. Income tax is now 2.7 million, max potential VAT is 660k. So max tax is 3.3 million. On top of this, people cutting hours need less childcare so fewer job opportunities.

The numbers are of course hypothetical, but illustrated the concept that lower taxes can lead to higher tax gains

@SleeplessInWherever you are “staggered” by people with higher incomes who choose to have children and know they have to fund childcare but you are not “staggered” by people who choose to have children and know they cannot fund their childcare?

Not quite, I’m “staggered” that someone who knows they have to pay for childcare, because they’re high income, would then complain about paying for childcare.

You knew that, surely.

It’s the complaining about known costs I don’t understand.