High earner but nursery fees still more - am I missing something?

[Mushroo]

We’re due our second next year, and I’m planning out nursery etc.

Im a ‘high’ earner on paper, but I still think I’m better off dropping to 4 days a week, am I missing anything? (I currently work full time with one at nursery).

(we have grandparent help one day a week, so the decision is me at work full time, and 4 days at nursery, or me 4 days a week and 3 days at nursery

Cost of 4 days a week at nursery after funded hours and tax free childcare.

• £669, two kids = £1338

3 days:

• £376pcm, two kids = £752pcm

Difference in price = £586

My current take home is c. £3550, after student loans and pension contributions.

I had a look on the salary calculator, and keeping my pension contributions the same (so I don’t lost out there) the take home for 80% is £3100.

So I’d be down c.£400pcm dropping my hours, but the price difference in nursery fees is £586.

So I’d be almost £200pcm better off working less?! Is that right or am I missing something obvious….

If that’s right it’s mad that a ‘high’ earner can’t out earn nursery fees!

If you weren’t working you won’t be paying into your pension so financially you would be worse off.

You aren't missing anything. It's painfully expensive.

As a high earner I paid 5 full days nursery a week, for my ds. It took all my disposal income after mortgage and bills.

You have to see it as for a limited period, two or three years. By dropping hours, you may lose momentum in your career so it may be worth taking the hit.

Regarding the nursery fees, it's because the three days already uses up your funded hours so any additional days are fully paid for by you.

I did 4 days per week when kids were in nursery. Things to consider are

• Still contribute full time amount to your pension, so you don't lose out in future.
• You are probably going to be expected to do full time amount of work in fewer hours.
• Kiss goodbye to promotions in many companies (not all) as you will be considered to be putting family first.

I wouldn't consider someone getting child benefit and funded hours to be a high earner. I say that as someone who is far from troubling the 40% tax bracket and gets full child benefit.

What?? My two in nursery, no funded hours, is the equivalent of a £100k salary. I’d class that as a high earner

It is a high earner within the child rearing age demography. Not the highest/super high, but high enough to be surprised that the childcare costs so much compared to earnings.

As the OP realised, it is just a result of different edge effects combined together (over 30 hours childcare, higher taxation, ...).

The 4 days plan seems optimal, getting more time with children without sacrificing too much money.

No, the trick is 4 days each parent so 3 days in nursery. Bonus points for compressed hours.

5 days is usually discounted so 5 days for two is likely 90% costs of one and 85% for the other or thereabouts (full time and sibling discount). Dropping to 4 days gets you 80% costs each as discounts removed. Dropping to 3 days gets you no discounts but the majority of hours are free and it's only 60% costs anyway.

4.5 days in 4 each gets you 90% if wages losing the bit with highest taxes, but only 3 nursery days so 60% costs. It's even worse if you are around the £100-130k mark as then you can sometimes drop a couple of days with no loss of disposable income due to suddenly getting free hours.

I'd suggest 5 days in 4 but hard to do in nursery hours.

Surely 100k is a higher earner particularly where nursery fees are concerned as the cliff edge can create an effective marginal tax rate of over 100%.

I had to drop a day when we were using nursery as I was literally working the 5th day for no pay at all if I didn’t.

The UK tax system is a bit punitive over £50k, hence what you are experience!

For me, five days with a 1 year old and 4 year old is £3,900.

But if I cut to four days and claim free hours and tax free childcare it drops to £2,100.

Do I need to earn an extra £1,800 AFTER tax EVERY MONTH to justify the extra day / income.

Not an entirely sensible system.

I’m not sure this is really true any more.

Yes it means you pay ‘higher rate tax’, but twenty years ago you might have said £50k was a high earner. We have had twenty years of inflation since then…!

Because you aren’t taxed at the same rate on all of your income.

eg the first bit is tax free up to £12.7k.

The bit of income OP is losing is at the 40% tax rate, so it’s a smaller % of her total net income (which is mainly taxed at 20%).

It's a no brainer really and I assume you want to spend time with your children?

Honestly, I don’t think £3500 pcm take home is really ‘high earner’ territory. You still actually qualify for funding and tax free childcare, for a start. I’d say that was similar to what I earn as a fairly poorly paid academic. 😂 Is it a good salary as part of overall household salary? Yes. But it’s not in the £100k range, which is why I think you are still struggling to make sense of the costs.

That said, paying less than £1000 for 2 children in nursery is very good. We were paying £1000 pcm for one child back when I was only earning £25k a year. It’s still going to take a good chunk out of your individual salary, but a manageable one. But could you work compressed hours? 4 days over 3 days. I often did this when mine were nursery age. It meant we paid for 3 days of nursery but got the benefit of the 4 day salary. I worked longer those 3 days and Dh worked longer, as needed, the other 2. And then I got 2 days off each week.

Sure it’s ’worse’ if you earn over £100k, but £50k is classed as a high earner in UK.

I mean, you can google all the reasons it is.

Aside from the tax implications (that also matter), it’s well above the median salary. The median full-time salary in the UK is around £35k. Someone earning £50k is therefore earning roughly 40% more than the median full-time worker – in the top 20–25% of earners in the country. Fewer than 1 in 5 UK workers earn £50k or more.

It has always been the case that going from one child to two children is the tipping point at which it no longer makes financial sense for both parents to be at work full-time. It’s unreasonable to say “I’m a high earner but I can’t out-earn nursery fees” when you’re talking about more than one child.

Take it all into account. I am also a ‘higher’ earner and dropped to part time (3 days) after having 2nd child. I don’t regret it. I am a little less a month in take home pay, less in nursery fees and I am there to spend more time at home with my kids.

The way I see it is that it’s a slightly better home life balance also. I honestly don’t think I’ll increase my hours once youngest goes to school either.

If you only need to cover from February/March 2027 until September (after settling!) 2028, then I would suggest using your accrued annual leave to take off one day a week. If your leave year starts in Easter, you’ll have 28? 30 days accrued? Plus bank and public holidays. Then another 28/30 days for the new leave year. There are only 20 Mondays you need to cover excluding bank holidays and your partner can cover some, leaving 40 days leave for you to take for summer or whatever and you’ll get a full months salary March-September

We have twins in nursery and came to the same conclusion, we’d be effectively losing money to send them the additional day rather than me dropping a day and being home with them.

My gross salary is £75k, which I would say is ‘high’ for a PAYE earner (obviously not megabucks) but I would class as doing ok! I have high pension contributions, student loan and private medical coming out.

For those saying DH should be paying half, he does pay half.

All the money goes into a family pot, the nursery fees comes out, but to drop a day a nursery one of us needs to go part time… so we both feel the benefit of the lower nursery fees.

It would be the same if he did it as we both earn about the same, but tbh I’d prefer the time off and he wouldn’t.

If your work is flexible definitely drop down, plus you get a day with your kids which is so nice (I used mine to also do the supermarket shop and general other stuff so we could have a more relaxed weekend).
Do take into account;
Will it impact promotions/advancement
Will you be desperately squeezing 5 days work into 4, or will they actually pro rata the work as well as salary (doesn't change the finances but causes a lot of stress)
Will they let you move back up to 5 when you want to

your nursery fees actually look fairly reasonable.
loving the comments about 50k+ not being a high salary. Tbf my DP is on over 80k and doesn’t see himself as a high earner and moans about being poor. But he is one.

And yeah anyone who says 75k is not a high salary is either a troll or doesn’t live in the real world.

Have you added NI, pension contribution in full, also your employer and holiday days?
how feasible is for you to go back full time after? As this could have a long term effect on your lifetime earnings.
also the nursery fees are half between you and your husband so surely in your calcs you are better off £100 as your husband contributions would stay the same?
anyway it could be possible, nursery fees are expensive and for 2 kids if don’t split them in two, in my area of London I calculated you need to earn over £80k a year to make it worth working.

I didn’t find four days a week better in terms of salary but is was such a tiny difference between that and five days once childcare was taken into account that there was no point to me doing the fifth day!