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!

You see this is where if I was the one on the left in the first picture, I’d lift up the little one up so they could see too.

Fundamentally- one doesn’t need to bring others down to pull others up. That’s just the grim Labour approach.

I understand the point being made, I still think it’s a nonsense.

I don't fundamentally disagree with you, but it is worth pointing out that most other well-to-do countries with universal childcare and overall better social safety net, it's not that taxes are just outright higher. There's many tax-deductable items such as cost of any self-funded training or even car mileage (for getting to/from work), so most people end up with a highly individualised tax code and yes, some pay nothing and some pay hugely. The goal isn't fairness but equity. Nurseries still cost something to most people, but it is a manageable cost, means-tested and at baseline highly subsidised. However, these are countries with far smaller populations than the UK so these exercises are easier to manage.

The government initiative shouldn't be seen as excluding the few but rather in including most. It's definitely a step in the right direction to support more women to stay in work.

I think people are just seeing ‘she earns more than me’ and seeing red.

I don’t believe any of these people would work if facing 80% or 100% tax rates and ‘feel grateful’ for it.

The new system creates huge incentives for higher earners to work less and earn less, pointing out the absurdity of that shouldn’t really be controversial.

Perhaps a bit of a misunderstanding about the kind of lifestyle this income level affords in somewhere like London too - and what the net figure looks like after taxes!

I’m not seeing red, or jealous or any other thing you’d like to throw around. I just don’t think we should be subsiding people on six figure salaries when we have children living in poverty.

It's not necessarily a question of subsidizing as such, it's about not having a tax system that is so badly designed that it's difficult to avoid concluding that the sole brain cell of those responsible for this dim-wittery was on sabbatical while the whole thing was being finalised.

I don’t believe any of these people would work if facing 80% or 100% tax rates and ‘feel grateful’ for it.

It’s not about feeling grateful, it’s about recognising the amount of choice you have that others don’t. You could work less, lower your salary and be under the threshold - loosing £60k of gross income for the sake of not paying your own childcare seems ridiculous but it’s a choice you can make. Your optimal choice would be to continue to work full time, progress in a very high paying career and have the tax payer subsidise you to do so.

You are not wrong. Artificial hard thresholds are causing awkward situations.

One option would be to see it as a benefit for the child and just give it everyone.
Or, if it should be means tested, it would be better to use sliding scale, so people on 110k would keep 25 hours, 120k 20 hours or something like that. To make sure every increase in taxes salary is beneficial for both you and state.

But… as I’ve said several times already… the size of the loss vs net income and cliff-edge application mean that anyone earning £100-160k needs to very seriously consider putting money in their pension or reducing hours to avoid actually losing money vs earning £99k.

This is not a benefit provided to help children in poverty - people with a net adjusted income of up to £100k can claim it, and households earning up to £198k.

You would have thought the tax system would be incentivising me into working more - not creating traps whereby it’s in my interest to pay significantly less tax overall to increase my take home pay.

I agree. I think it’s somewhat patronising of OP to assume that people with differing opinions are merely jealous. Without a doubt, some will be. But surely, OP, you can see that some people are essentially taxed 120% if you consider their living costs against their wages. No luxuries, just trying to exist and survive in this country.

A lot of posters, myself included, have acknowledged the brutality of the cliff edge on childcare. There’s always going to be a loser because it has to stop somewhere (under the current model). But you have leavers you can pull to enhance your position. You can reduce your hours, pay more into your pension if accessing this support is so important to you. It’s your choice not to. Vs plenty of people have no choice but to essentially live hand to mouth every month, or worse - go without the basics.

I'd have to work 7 years to earn £165k!

It is about subsidising, if the tax payer is covering your childcare costs they’re subsidising your life style. I don’t love the tax system, particularly in Scotland where I pay a higher proportion of tax than the rest of the UK, but recognise it as part of a society that provides a safety net for the most in need. Someone earning well into six figures is in no way “in need”.

Why is it either or?

It would be easily possible to change it in a way that people will have less hours funded with increasing income, without creating the current cliff.
It's economy 101 than cliffs cause illogical incentives. And any law which is encouraging a woman with a small child to slow her career not for care reasons but for tax optimisation reasons is just not fit for purpose.

You aren’t!!!! Fgs. She pays c60k in tax.
why in earth shouldn’t she take out of a system she pays so much into?!?
🤦‍♀️

You aren’t!!!! Fgs. She pays c60k in tax.
why in earth shouldn’t she take out of a system she pays so much into?!?
🤦‍♀️

@crossstitchingnana why should someone who pays heavily in tax not get some support in return regardless of 160k? It’s no wonder so many women give up work regardless of earnings. What’s the point of having a high stress paying job and paying through the nose on childcare, while someone else not willing to push forward to take a bit of responsibility in their career to earn more money gets childcare for free?

a lot of posters here sound so jealous, yet same posters would say oh women should aim for the highest levels.

Actually yes, the taxpayer is.

Essentially she’s wanting a tax break to find her childcare, on a six figure salary.

The tax she pays would then be cyphoned from those who really need it back to her.

A couple earning 199,000 between them shouldn’t be getting funded childcare, either. It’s obscene.

But the thing that is annoying about this situation is that, if it was sorted out, more tax would be paid and we would all have more money. Not just higher earners, all of us.

It's not a 'high earners v low earners' issue - well, the cliff-edge at least isn't.

Essentially, we don't want women (and it's mostly women) dropping out of the workforce or reducing their hours due to childcare costs. It hurts all of us.

We might have very little sympathy for a woman earning £40,000 whose husband goes over the £100k threshold, and suddenly it's not worth the family's while financially for her to work until the kids are in school so she takes a 5 year career break and finally goes back at a much lower level than she otherwise would be at.

But it costs us money. It costs all of us money when people make decisions like this. We want to incentivise them not to make decisions like this so that we maximise what is available in the pot for distribution to those who need it.

I agree with you OP but people see 160k salary and can't think straight.if someone earns this sort of money they have either special knowledge or bring a lot of money for their company so makes more sense to encourage them to work as much as possible. Now we have 19 part time receptionists paying no taxes and 1 project manager bringing million of profit for their company and paying 80 k of taxes. Government gives each receptionist 10 k of childcare subsidy, project manager quits , Government pays 190k of subsidy, loses 80 k of taxes from PM and 250k of corporate profit. Everyone on mumsnet is 😊i

@Goldbar @FourIsNewSix Thats why in my original comment (which is buried deep at this point 😂) I said, in an ideal world it would be available to everyone.

But good luck campaigning for it, given it impacts such a small number of people (top 5% earn over £100k, and of that not all will have nursery aged children). The tapered annual allowance used to be equally as disruptive, and it was only when Gvmt realised it impacted Drs & prevented them working overtime that it changed.

She is a taxpayer as well, paying a lot into the system.

If you motivate her to earn less to optimise the cliff (which is her full right), it automatically means state losing the taxes she would have paid otherwise.

It's even possible that the current setup is actually a net loss for the shared pot, losing the taxes people would have paid if they weren't forced to optimise.

You can work more, you’re well
past the point of the childcare cliff edge, you’re already paying the marginal rate on that proportion of your salary, but it doesn’t apply to everything you earn past that point. You’ll keep 50% of everything you earn above the £160000 you earn now. And when your child goes to school you’ll no longer be paying childcare so you’ll be better off again.

I would probably go part time

The op is paying far more into the system than most. She is subsidising others.

Left pocket, right pocket. It's a question of semantics.

If someone works less because they are not being 'subsidised', resulting in a net loss to the taxpayer, is that better than them working more, being 'subsidised' and the taxpayer receiving more money?

If getting more from the system means ultimately some people put more in, what's the point in sitting around arguing that they shouldn't be 'subsidised'? It's cutting off your nose to spite your face, frankly.

To be blunt, as a society we can't really afford well-paid women (and it's usually women) whose partners earn over the threshold to give up their jobs to spend 5+ years visiting NT properties and singing 'Wind the bobbin up" at toddler playgroups. It might be good for them and their families, it's not good for the taxpayer. If not 'subsidising' their childcare leads to this happening, it's bad news for the rest of us as it means less money to go around.