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!

YANBU at all, just another hidden tax on high earners and as you’ve said it’s structured in a way that disincentivises working more at certain salary bands so economically makes no sense. Like most of the other half baked policies this and previous governments have come up with here.

1. A nanny in London seems to cost about £40-50k a year (inc all tax, employers tax etc). So it would be twice the price of the nursery - and over 50% of my take home pay
2. The issue of people being on very low incomes is an issue, but isn’t really relevant to the point I’m discussing
3. No, on £160k you couldn’t buy a house in a year. It’s about £90k after tax.

I’m not new to mumsnet.

😂😂 you can take a horse to water etc.

Lets look at it a different way.

I live in social housing. I work full time and the amount I earn makes me ineligible for any help with my rent. So I pay the full amount.

If I earned less, I'd be entitled to a top up from universal credit to make up the rent payment. If I wasn't working at all I'd get full rent paid. My downstairs neighbour is on benefits. She pays no rent or council tax, it's all paid for by benefits.

If I wrote a post where I was moaning about that, I'd get my ass kicked! Rightly so. To use your argument, I have to earn around 15k a year just to cover something I'm "ineligible" for that other people can get. And believe me, I'm on a lot less than 160k!!

So no matter what arguments you put forward, it does come across as greed. It doesn't mean people don't get your point. But it's still greedy!

Yep

Yes it’s remarkable you still don’t seem to understand the difference.

I think part of the problem is the combination of the loss of the personal allowance AND loss of all the childcare - them both kicking in simultaneously creates a real ceiling.

No one asks for sympathy so no need to be snarky. All she is asking for is accessing the benefits her tax money is funding and is pointing why this is such a poor system.

yes, she earns a lot of money. As woman should we not be celebrating her and saying what a great role model - but instead it’s just a snarky comment??

Yes.

A good way of positing it for people might be - imagine if you got a 40% pay rise with a promotion and additional responsibility, but that you got £0 in your pocket.

Would you do this unquestioningly and ‘suck it up’, or would you be trying to optimise this to your benefit a little more?

Seriously, being an older parent, and now finally making good money (but only in the last 3-4 years) I get penalised, while juggling paying for a house in London, raising kids, and trying to also look after my and my wife's retirement - which is not all that far away.

But no childcare for me because I make too much money! No regard whatsoever to cost of living or life stage.

I agree there should be universal childcare. It is for society's benefit, not the parents.

You miss the point.

If the rules are too onerous higher earners have a decision to make. In many cases that will be to work less and thereby pay less tax.

Who does that help? Not only does tax paid reduce, it can also lead to a fall in essential public services as the government has already found out with doctors who have pre-school age children refusing to work FT.

Any system that incentivises the highest tax payers to work less is bad news for everyone.

Honestly, the responses on this thread are infuriating and indicative of the mess the Uk is in.
We have massive productivity issues in the UK - a tax system where you can earn more and be worse off is utterly ridiculous.
If you get parents…(often mums as the primary carer) back to work there are huge financial benefits in terms of tax revenue. There is a net positive impact, in addition to tackling inequality.
Those saying OP doesn’t ‘need’ money for childcare - why should she not take out of a system that she contributes so much to?

Yes, you're right, although it really won't be received well on Mumsnet. What with this and the loss of personal allowance, plus then additional rate tax, you get absolutely clobbered between £100k and about £140k, when it then makes sense to start earning again. It certainly affected me when I was looking for roles just from the taxation perspective (even though childcare now isn't an issue for me).

How I've seen people deal with it? Additional pension contributions / posh bikes / sal sacrifice on cars / donations etc to reduce taxable income, and also dropping down to 4 days a week, although then you have to be careful you're not put on the 'mummy track' due to lack of commitment. I have also heard of 'tactical separations' during this point, (followed by magical reconciliations 🫣) especially if you've got both parents as high earners, although that one did raise an eyebrow or two. It is certainly a disincentive when you're at this stage in your life to continue with career development unless you've gone through all the consequences fully.

And of course if you then do increase your pension / drop your working days, you then aren't paying as much tax at all - which goes to fund all of this in the first place. Definitely catch-22, and not fair in the slightest, however Mumsnet won't necessarily be the best place to have a fair sensible discussion on this.

It should be a universal benefit, and I say that as one who 'only' had the 15h free once they turned 3, and who had to fund the rest of it themselves - I had to purposely space my children out to consider this, if I'd had the 30h then I'd have had a much closer gap. Having it as it is is In effect driving avoidance behaviours from the few net contributors to HMRC, which doesn't make sense to me.

Exactly!

OP you keep talking about ‘having to earn extra’ and ‘having to cover’ and ‘make up’ the extra money. This is the language of somebody who is struggling financially and is unsure they can afford it.

Is that actually the case for you? Will you struggle to afford nursery of you’re not subsidised? Or are you more upset about having a bit less to put into savings/posh holidays/big house/fancy car/designer handbags? Or paying more than some others for the same service?

It’s difficult to comprehend someone on your salary feeling anxious about this.

You talk about it being a ‘loss’ to you, rather than acknowledging you are simply not getting a subsidy that others get because they need it. You don’t. So it is not a loss to you.

I honestly think you’d be so much happier if you turned your mind to focus on what you DO have. Far more wealth and ease than almost everyone else in the UK. And globally? There are people who can’t afford shoes, a roof over their head, or enough to eat. Maybe some gratitude and counting your blessings would feel better for you.

No, on £160k you couldn’t buy a house in a year. It’s about £90k after tax.

You can in the north.
3 bed terrace, not unlike to the one my parents owned.

Obviously in London you can't buy a pre-owned, vomit stained cardboard box for that, but, ya know, we don't all live there.

This is just the attitude I’m talking about.
why can’t you think in terms of of the bigger picture?

The mean-average tax paid in the UK for 2023/24 was £10.6k per household, and more than 70% of households actually paid significantly less than that.
On her salary, the OP's individual tax bill is £58.2k.
She is already subsidising the rest of us.
(edited for clarity)

Cry me a fucking river. My kids were in nursery when 30 free hours for 3 year olds first came in, and it was the difference for me between zero net income and actually taking some money home. Your salary is literally 10 times what mine was at that point in my life. Get over yourself.

The whole system needs looking at. Given access to means tested benefits like Universal Credit can be done on a household basis, even when people are in work, I don’t believe that the government couldn’t manage to sort out means testing by household for Child Benefit, 30 Hours Funding and Tax Free Childcare if they wanted to. If the means testing was done by household and there was a sensible tapering off of entitlements that would sort out the issues of fairness. Additionally, they need to look at the loss of the tax free allowance for people earning over £100k, again this wouldn’t have to be a tax cut, just remove the cliff edge and have a tapering off to ensure the total tax take is modelled to be the same as it is now.

I think Martin Lewis (the financial journalist) has been lobbying the government on these issues as it makes sense from the taxpayer’s perspective too. At the moment people are behaving rationally to support their own families by reducing their working hours or paying extra into their pensions but if the incentives weren’t there people would be likely to work more, go for promotions, pay more tax and boost economic growth.

Or maybe they should all work a bit harder and earn 160k themselves 😜

Does DC father also work full time?

Just my view but I feel sorry for the child. You say you could drop some hours and pay into your pension but you never mention the benefit to your kids by doing this.

(Apologies if dad looks after them part time).

The welfare system was supposed to safeguard, now it is regarded as a right and people structure their working hours to maximise their benefits and minimise their working hours. That shouldn't be an option. Everyone should always be better off if they work more otherwise the system will implode. Which is kind of what it is doing.

I can't see any Government ever changing this because it would be hugely unpopular with the electorate is too political.

OP you can afford to pay. It might not be fair, but when it comes to welfare and tax nothing ever is.

Op- having seen the experience of a sibling (similar salary) with 2 young children (year apart) while covering a London mortgage at the same time, I have some sympathy for your position.

I would favour universal provision of nursery care paid for by a more streamlined taxation system (no tax traps). In your (and my sibling's) position, this would certainly mean a higher additional tax rate - so years with young children would be less painful but you'd end up paying the difference back (and more) smoothed over time. I'd also charge NI on larger pensions (maybe at a reduced rate - for improved health care provision).

it really is re your first line.