The £100k childcare cliff edge - how is anyone meant to make this work?

[Saladleaf]

I completely understand that on paper, a six-figure household income sounds like a lot. I’m not trying to be ignorant of the fact that many people are struggling far more. But for anyone actually living it, especially in the South East, the reality feels very different once you factor in childcare costs.

We’re looking at full-time nursery fees of around £2,500 a month per child, and I honestly don’t know how families are supposed to make it work once you hit the £100k cliff edge and lose access to the 30 free hours. It’s completely unsustainable.

I know some people say you can get around it by putting more into your pension so your income technically falls below the threshold, but that just isn’t realistic for everyone. With the cost of living, mortgage, and general expenses, we simply can’t afford to take home hundreds less each month. We already don’t have holidays, don’t buy new clothes, and don’t even have a car. There isn’t any more to cut back.

It’s not even about wanting handouts, it’s that full-priced childcare in this country is so eye-wateringly expensive that it makes working impossible for many women. The system actually discourages the lower earner, usually the mother, from staying in work.

A friend of mine is a good example. Her husband earns over the threshold, and she’s just spent years retraining into a new career that she’s passionate about, but is now entry level. We worked out that if they have a baby, it would literally cost them money they can't afford for her to keep working once childcare, rising mortgage payments and bills are factored in. She’d have to give it all up. It’s so demoralising.

And the whole system makes no sense. Two people earning £99k each can claim free hours, but one person earning £100k can’t. Someone on £50k with one child gets support, but a couple on £100k with two children get nothing, even though their childcare costs are double and they are taxed more. It’s not unreasonable to have worked hard, built a decent career and want two children, but the government seems to penalise you for it.

Other countries manage to offer affordable childcare to everyone because they see it as essential. Here it just feels like you’re being punished for trying to do well. For those of us in the South East, it’s even harder. Living costs are sky high, childcare is extortionate, and it’s not realistic to just move somewhere cheaper when your jobs and lives are here.

It feels like you’re being backed into a corner. I find it so demoralising that the system seems designed to push mothers out of their careers, especially when you’ve worked so hard to build one in the first place. AIBU in feeling like this?

Thanks for the advice. I pay a large amount into my pension.
But some (particularly single income households) need the take home pay. And this is where the thread started. If you have one £100kplus earner. There is little incentive for the second parent to work also because the cost of childcare completely obliterates most salaries if you cannot access free hours. The stats show this particularly impacts women and increases inequality.
I have said it before but I will repeat - many reports show funding childcare would have a net positive impact because of associated tax receipts and keeping women in work, with a continuing career trajectory.

someone I know is in this position they are single (by choice) earning £125k with almost a £30k bonus which sounds delightful on paper except everything over a certain amount is taxed 65%! I could hardly believe it when they told me. They have salary sacrificed their whole salary and bonus To get their earnings under 99k into their pension until their child goes to school just to get the 30 hours free funding. It’s completely unfair.

We don’t qualify because although I work full time, it’s a training course with a bursary and both parents have to be working and taxed. I find that nursery keep putting up their rate as there are so many people who do qualify for the full amount of free hours so we’re paying so much more to subsidise this. Universal childcare would be so much fairer!

Maybe it's because no one chooses to need the NHS or the Fire Service, but you do have a choice over whether you have children or not. You can also choose (depending on your age) to not have a second child until the first one is in school.

The 100k cliff is a problem even without childcare due go the stupid was tax works and the clawback of the tax allowance.

And you are correct it sounds like loads of money, especially when you have a lower household income. But it’s actually not that much, ESPECIALLY in the SE. And to fund childcare of 2.5k per month out of that. Yikes! How do women in the SE work and have kids?!

It’s a dreadful system and it doesn’t work for providers either. I’m a childminder and the rate for 3-4 year olds is so low that I now don’t offer funding for that age group.

This is part of the issue though. People see nursery as “childcare”, when really, it isn’t, or it shouldn’t be. It’s early years education. It may not be mandatory education, but we do know a solid educational foundation laid down through play in early years (pre-school age) has a lasting impact on children’s attainment later (eg GCSE results).

Decent nurseries are also there to pick up issues with development and help parents access the support they need earlier. Eg making sure children with verbal delays access support sooner, which mitigates the risk of more serious speech and language issues later down the line.

Decent early years provision is of societal benefit. We need to start seeing it that way rather than as just a necessary and expensive means to get parents back into work, and with that comes the imperative to improve the quality of provision and the practitioners and to make it universally accessible.

Google IFS podcasts ‘how to fix income tax’ and you’ll find the country’s most intelligent tax wonks bitching about how insane this system is, and how it disincentivises women from working (skip to 23 mins in if you’re short of time although the 5 mins before that is spent bitching about the 62% marginal tax rate madness that kicks in at £100k).

I really feel for providers. The funding rate clearly isn't enough but they're always railed on for desperately trying to make up the difference with extra charges... It infuriates me that the government claims they're offering "free" hours to parents.

This is actually a recurring rant of mine - that every financial interaction with the government is in the form of "hours", "credits" etc instead of just being honest and saying "we are giving you £x an hour off your provider's rate".

I was going to link to this! I love the IFS podcast although I appreciate it's a bit niche for most people. The one on depopulation was interesting too.

They should have called it a subsidy in the first place.

The government could have said "everyone who qualifies gets X hours subsidised to zero OR Y hours at £whatever off" to cover the fact that pre school education is beneficial (as mentioned by a pp) and that childcare's needed to work.

Also in Wales you can’t salary sacrifice and pension contributions don’t count as the threshold is £100k gross. I have dropped a day, won’t pick up any extra responsibilities, won’t cover vacant shifts at short notice and will take unpaid parental leave to bring me under the threshold.