Loss of 30 free hours will cost me £37,000 of pre-tax income

[ChildcareCost]

9 month olds are eligible for 30 free hours from September. If you earn over the threshold, you do not get this 30 free hours plus the £2,000 of tax-free childcare.

My nursery typically charges £2,150 a month for an under-3. This works out at c. £10 an hour assuming a 50 hour week (open 8-6).

They have circulated the free hours schedule this week, and the monthly cost with 30 free hours is £1,100 hours for an under-3 (noting funded hours only cover 38 weeks).

This means the loss of the 30 free hours will cost me £12,600 a year. Plus of course the loss of tax-free childcare at £2,000.

So, I need to earn an extra £14,600 net just to cover the cost of not being eligible for this scheme.

To earn that £14,600 over £100,000 – I need to earn a gross figure of £137,000.

Surely this is not fair on the parents excluded from the scheme? It doesn't seem proportional that I need to earn an extra £37,000 just to recoup the loss as a result of not being eligible!

Not really - including the loss of childcare and personal allowance, if I want £160k I take home an additional £11k on those earnings over £100k - an 82% effective tax rate.

So still very significant and sufficient to make you find ways around it - and even going part time to allow sufficient pension contributions to get under the threshold.

I have to say I’ve got nothing against what OP earns, she’s smashing it and doing so well for herself.

if this was a dad earning everyone would be expecting him to pay CM if she was single due to what he earns…

You're putting your 9 month old into 50hrs of nursery per week?

Not being eligible for a particular benefit isn’t a “cost”. It means that you’re not in the group of people that the government has deemed should receive the benefit. If we all worked out all the benefits we weren’t eligible to receive because we don’t qualify for some reason and considered them to be a “cost” it would be a total farce!

And very sadly as a country we can’t currently afford universal free childcare- the countries I am
aware of that can usually pay higher rates of tax and the childcare itself is different with state funded nurseries (rather than private providers run on a profit making basis).

They won’t be there that many hours, but the nursery charges for when they are open, and so that’s how they calculate it.

But yes, I am going back to work full time (or maybe not actually, given the tax / benefits situation).

Yes, because he would be paying for his own dc.
Why should child free workers on minimum wage subsidise childcare for a person that earns £160k.
The point of government subsidised childcare is to encourage low paid parents to return to work.
Op needs no encouragement to return to such a high wage.

We have this problem a bit. My husband earns just over the threshold so we pay extra into his pension to make us eligible. But with the funding (currently 1 x 30 hours and 1 x 15 hours) we pay:

£1100 for the eldest and £1300 for the youngest for full time nursery.

Without the funding it would be £1600 each. So we “save” £800 per month for the fees (£9,600 per year) plus get £4,000 per year for tax free childcare (£13,600 per year).

My husband pays in about £300 extra per month into his pension to make us eligible. But if he didn’t we’d effectively be £10,000 worse off a year. That makes no sense! They should be a sliding scale so that people don’t siphon off money into pensions and actually do pay more when they earn more.

No 30 hours free childcare when my chikdren were 9 months old. Just 15 hours post 3yrs.

and I had to pay expensive childcare on nurses type salary.

It is, because I can alter my work hours and pension contributions to claim it if I want to.

As it stands, earning less that £137k I would lose money vs earning £99k. So under that income you would have to use pension contributions to avoid it - or lose money each month.

At my income, I still make some ‘profit’ over £10k vs earning £99k, but still within a threshold that means changing my working patterns or pensions contributions / childcare hours used may make sense for my overall financial position.

Imagine, if you will, you got a 40% pay increase but were taxed 100% of it. Would you work the extra two days a week, or would you do something else?

If that really was the point, the cut off wouldn’t be £100k. Low cost childcare should be universal as it is in many other European countries.

Not necessarily- the safety net here is not to stop people starving to death, it’s so that it makes financial sense for people (including those with with good careers) to return to work without being financially worse off in early parenthood. It has quite a generous cut off but if you look at the figures, you can be earning a huge amount in certain parts of the country and still be worse off if you have to pay full childcare- especially if you have more than one child.

It isn’t a logical system. Me and my husband both earn around 120 -bonus depending- and we both salary sacrifice into pensions (because our employer pension contributions are relatively poor compared to salary) meaning we qualify for the 30 free hours for both nursery age children. Which saves us around 25 k a year nursery fees.

It’s hardly a great harm for OP to pay into her pension for 2-3 years rather than lose it in tax!

Working less is absolutely an option. So is realizing that this is one of the things to be considered when having children.

It will only be for a few years, then you'll be able to keep all your salary for yourself.

You’re obviously not wrong OP. It’s totally nonsensical. But you have to have a reasonable intellect to understand the true impact of these government policies. It’s basically a tax, a blunt instrument at best.

Do what I did… move. Dubai, Luxembourg, Portugal, Greece, Switzerland. All good options depending on your industry. I have access to fantastic healthcare, my children are thriving at an international school and I have far more disposable income than I would have had, had I stayed In the UK using the NHS and state schools.

Britain is sadly in full decline because it’s no longer attractive to people with any real money. 16,500 millionaires are leaving the UK this year, the highest on record. Labour came in with a 12bn deficit, raised taxes, and that deficit now sits at 41bn… and they’re looking at raising tax further because it worked so well the first time.

Good luck OP. If I were you, I’d take my money and run.

This was us. Rather than wail on about how unfair it is I think a better approach is for those earning 80-100K should just class themselves as super lucky that they don’t really ‘deserve’ it but are getting it anyway.

as others have said if you earn just a little bit over it’s easy to salary sacrifice to bring it down therefore it only really affects those substantially over

It's hilarious to me that you earn £160k (and I'm assuming also have a partner whose arns?) and you are moaning about the loss of a benefit designed to help ensure children can access early years education in poorer families and those with middle income can continue to work.

Also this is a benefit that applies for a few short years while you can enjoy your. Wry high income forever so don't worry, you and your children are still very important and advantaged.

Exactly. That’s more than people in the government earn and we would all say why should they get funded childcare. Either cut your hours so you’re earning less or pay what you owe. Simple

You are being more unreasonable than possibly anyone I have ever seen post on this forum.

You are not eligible because you earn an absolute boatload of money. The scheme was not set up to help people in your position.

What are you not understanding.

You say it's unfair you as a woman, could reduce hours but the are disadvantaged in a male heavy profession. Do you have a male partner? What's to stop HIM reducing hours?

Are you a single parent or do you have a husband/partner? If you do have a partner, does your household income exceed £198k?

With that attitude, good riddance to you!

Lots of people don’t get it OP, but even as someone earns far less than half of your salary, surely people can appreciate that it is not fair that those that pay the most are able to access the least? Particularly when we have an ever increasing population and a significant minority that contribute nothing, yet take multiple ten of thousands out of the system per annum. My take is that all benefits should be based on contribution - not salary necessarily, but to society…a little utopian perhaps, but if people don’t positively contribute to a community why should they be entitled to access the benefits it yields. This would mean high earners can get something back and people who do very little have them stopped. The people at the top will just leave if they give, give, give and then where will that leave us?

But this is a completely circular argument! We can all take steps to bring ourselves within the parameters of certain benefits. I could burn my own house down and pour drain cleaner into my own eyes and I then I might qualify for housing benefit and DLA!

I agree you should consider going part time for a few years and putting more into a pension- this would not only benefit you but you’d also potentially be opening up a part time position at your work and putting more money into the financial system to be invested (via your pension). But the fact you can do this is a representation that we live in a free society where people can choose to structure their finances sensibly- it isn’t an argument for not capping entitlement- on your argument someone earning £3 million a year would still be getting the benefit- totally bizarre.

I think you’ll survive on £160k per year 🤯

I had my babies 10-15 years ago and there was ZERO funding for any free childcare for 0-3 year olds. When they turned 3 we got 15 hours free childcare per week.

Most couples managed to pay for their own childcare, despite earning less together than you earn alone.