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!

There was a time where my salary was c£100k and I had two children in nursery. Full time cost without subsidy would have been £3.5k per month. My monthly pay was £5.7k, leaving £2.2k.

I’m a single parent.

In reality I cut my hours and was therefore under the threshold but if I had worked for that salary without any tax planning I would have been worse off than someone on £30k.

You say “surely I’m not the only one”.

You’re in the top 1% of earners and I would wager that most people earning that amount are sensible enough to understand that as part of that 1% they can afford their own childcare and don’t begrudge not getting it for free…

Knowing there isn’t enough resource for childcare to be free for everyone, do you really honestly think it’s wrong that because you earn more than 99% of people in the UK, you’re no longer getting it for free?

Why is it that you think you should be getting financial support for childcare when you earn more than 99% of the country?

If you want a job earning 160k you need childcare.

For those on low wage jobs because wages and CoL dont match up they need funded childcare to be able to work.

Not everyone can earn 100k plus.

You want free childcare - fine - quit work or find a lower paying job and allow someone who will be happy to fund their own childcare to have yours 🤷‍♀️

YADBU

So would you be happy for wealthy people to pay for private childcare?

I wonder why people think there's got to be a limit on it?

We already have some universal free childcare hours anyway. As well as other benefits and provision that isn’t income related such as DLA/PIP/AA, maternity and maternity pay, the bus pass etc. Clearly we're ok with some things being given to people on whatever ones particular income barometer would be.

The problem is not the removal of childcare help from £100k, it's the cliff edge that means parents lose money between £100k and£137k. This is an absolutely absurd situation - that you have working parents going part-time, cutting hours, paying more into pensions and generally scrabbling around to ensure they don't earn above £99,999. It's a stressful waste of time and money.

The removal of support should be tapered from £100k (or maybe even lower, from £80k) so that it always pays to earn more money. Anything else is just moronic.

I don't think you should receive help with childcare, OP, if you earn £160k, but neither do I think you should have been worse off for earning more between £100k and £137k, or whatever the figure is.

But you won't get mass sympathy, I'm afraid, because it's not an issue that affects many people and, as is evident from some of the comments on this board, many people have fewer critical thinking skills than a lemming (or at least refuse to engage their brains with an issue which doesn't affect them).

You are making a very reasonable point (I am in exactly this situation and have managed down my income by working less and maxing out my pension). The government would gather more tax from us as a family it there wasn't such a sudden cliff edge at 100k where income tax goes up hugely and you lose the childcare benefits.
It's a stupid policy because it incentivises lower economic productivity of high earners which is worse for everyone.

£160k isn’t the top 1% of earners - you need to be over £200k now to be in the 1% I think.

But I digress - why should households earning up to £198k be able to claim tens of thousands in childcare help, but one parent earning £100k claim nothing at all?

That makes no sense at all.

If the value was small it would be less of an issue - but at £37,000 a year of pre-tax earnings… that’s very significant.

I imagine those earning £99999.99 don't "need" funded childcare either. The threshold is obviously not based entirely on need. It's arbitrary and I think counter productive. OP is right to be irritated.
Would we feel the same if state education was withdrawn for higher earners?

Expecting top earners to fund childcare for the children they choose to have for a few years before state education kicks in is hardly treating them as cash cows. I earned far less than op and had to pay for childcare as I'm in Wales and the funded hours could only be taken in school settings for either all mornings or afternoons. Great if you didn't work. Useless for me as a working parent with a commute. I also funded wrap round care as wfh wasn't a thing then. I got on with it and got myself in a position to accelerate my career.

I agree - why shouldn’t it be universal?

Those being excluded and potentially going to significant lengths to make themselves eligible, will be paying a very significant amount of tax (and probably even more than now - if they no longer are taking actions to reduce their income to claim it).

I see what you’re saying. It’s like when they changed child benefit, no tapering just a cut off that favoured two working parents not one higher earner.

However, when I had my DC, funded hours weren’t there’d so I’d budgeted for paying for childcare. There were at that stage more childcare voucher benefits through the workplace but not as many funded hours. It’s frustrating but not for that long.

But you are looking at it from a very blinkered view. You can only see it from your perspective.

What about all the men out there who earn £160k per year. Should they also receive the free childcare? They are not pondering over whether they would be financially better off if they reduced their hours in order to access the free childcare!

You can’t have a tax and benefits system that treats men and women differently.

Personally I think all DC should get help help towards their childcare if their parents work full time. I think all DC should get free school lunches and then maybe pay less in benefits. No immigrants should be able to claim UC. They are supposed to be able to support themselves. No childcare benefit should be sent overseas.

Dh and I managed this problem by having a large age gap and using a nursery we could afford on our incomes. Back then, together we probably made about £40k and there was no funded hours. Our nursery was £1100 a month for one.

We make over the threshold now and that’s fine, because we earn plenty of money and live within our means. I’d much rather my taxes support people who need help paying for childcare than people like us who are comfortably off. 🤷🏻‍♀️

The great thing about being a high earner is it gives you choices. You do have the choice to work less to bring yourself under under threshold.

How am I suggesting the tax system treats men and women differently?

I know people of both sexes using pension contributions, EVs and part time work to claim childcare hours. It’s whoever if above the threshold (or both, as is sometimes the case).

It's not gross salary, it's net adjusted annual income.

Guess you wont be answering why its unfair you cannot claim universal credit then?

Would you be better off hiring an au pair?

Yep.

So completely tone deaf.

How does it treat men and women differently? I know a man who has upped his pension contributions on order to remain under £100k for this very reason

You earn over 160k and you’re crying about paying for childcare. I find it hard to have sympathy when there are people out there working every hour under the sun, picking up weekend jobs, choosing between eating and heating and living pay day to pay day just to get by. These people don’t get to have a day off, don’t get holidays and if heaven forbid anything happened like the car or fridge freezer breaking down they wouldn’t have the money to pay for it.

It would take me nearly 8 years to earn what you do in one year. If you’re struggling you’re spending money you don’t need to be. Simple.

If your child is under three then they may well be better off with a nanny than in a nursery. I think many studies suggest this and it sounds like that may financially be an option for you. So maybe the funding for nurseries needn’t be relevant.