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?

Agree. Have you looked at salary sacrifice schemes for nursery fees?

Yup. I should name change but won’t. But cliff edge for us means the financially sensible thing for me - and my 9+ years of education in a field I love working in and am good at, where my skills are needed - am better off £ wise at home with my kids (ideally FT but for my sanity part time). And yes it’s only for a few years while they are young etc. but it’s a high proportion of qualified working life if you’ve more than one child!!

solutions = childminder (less £ than nursery, especially for siblings). Condensed hours and on call weekends (when dh can be with the kids / but also has an impact on QOL for kids as have to turn down class party’s etc). No family locally so we swap one afternoon post school with another family (to save afterschool club fees and allow cheaper nursery structure that day). But in reality most of these I do as I like work- if I didn’t it would make the most sense to give it up for a few years entirely.

In SE, from what I’ve heard - the vast majority of parents that can salary sacrifice, go part-time or pension dump to avoid the cliff edge do. With two kids - and the new hours - even allowing for significant nursery top ups etc. you’d want to be earning 160+ to make up for the loss. Esp as often the slightly higher roles require significantly more input in terms of hours worked and/or task demand. There’s no incentive to earn it. Feels like a v contradictory policy when you hear people’s stories about how they avoid it!!

They have improved the child benefit situation, by making it a gradual reduction from (I think) £60-80k. So you’re not worse off by earning more (I don’t think?)

Why they don’t do something similar for £100-120k or even £90-110k for the childcare hours I don’t know. Actually I do - it would be too difficult for nurseries to administer I expect.

It is absolutely crazy though. Problem is £100k sounds like a huge salary to many people so there’s little sympathy or public interest in sorting it. I’d imagine it also affects a relatively small percentage of parents.

Our family income (not highest earner) is nowhere near 100k and I think the system is bonkers... it should be based on a family income and be tapered. Or, if that is to much trouble... just make it universal.

The problem is its a halfbaked Conservative idea poorly delivered by a Labour government who didn't fully believe I it. (Any Party can be substituted in).

You’ve not understood the issue of how the funding is removed, and the impact this has on incomes over £100k.

People don’t ’just suck it up for a few years’ when they’re paying 100% tax on a third of their income. They take action to avoid it - pensions (~28k in tax immediately lost for HMRC, plus having to fund the hours), or moving part time.

The tax free childcare came in when mine was small and actually child care vouchers were still possible. It didn’t save masses but a couple of hundred a month between the two of us (I think). It is only a short-term cost and painful at the time but it does eventually go.

Net debt is phenomenal at the minute - look at the data published this week. I appreciate the £100K taper is unfair and doesn’t encourage productivity and it’s tough for so many people but these policies are not easy to implement (this one took a good few years). Personally, and controversially, if any funding was available, I’d prefer it to benefit in having children school ready who may come from dysfunctional homes. I think that this will have the most economic benefit for the country in the long term.

The issue seems to be people on around £100k whinging that other taxpayers, 95 odd percent of whom earn nothing like that, should subsidise their childcare costs. And that really, it would be in their best interests to do so. Totally ridiculous.

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.

That in itself is a luxury most families with children cannot afford.
I've had people suggest "why not retrain?" - errr cos I can't afford not to earn money while I spend years doing that.

Those childcare costs are eye watering. I'm £40 per day (Scotland). I'm under the threshold and get 20% paid with tax free childcare. I had no idea it was so expensive in the SE. I would also consider paying extra into pensions. We do that as it keeps my OH just under the CB threshold as with 4 children CB really helps.

I agree that childcare needs to be better funded and reviewed. There should be a sliding scale but I have a feeling that the government still might set this at 100k for the top end.

Most people now days have to plan an age gap to avoid having two in nursery full time. It’s becoming very common to have a 4 year age gap or larger. I hardly know anyone any 2 year age gap and if they did they are very fortunate to have family help with childcare or money to fund it.

Havent rtft but yanbu.
Childcare needs an overhaul.

What no one seems to want to acknowledge is if you the audacity to also have Private healthcare and dental for your family or any other other "taxable benefits" you dont need to earn anything like 160k to be stuffed on childcare....and even jamming 60k (which you need now) into a pension wont help you.

It's a total farce and I am sick of being told I should be delighted and how bad every other bugger has it ....when my basic living costs are now tipping over 8.5k per month net and almost 5k of that is childcare. We have reduced meat consumption and shop in aldi - i have never had lower disposable income in my adult life.

And I am not allowed to admit / supposed to say out loud that I am fucked off because everyone else has it worse so what's wrong with me?

what's wrong with me is I AM supposed to be living well (I earn in the top 5% and not much about my life is indicative of top 5% right now), its supposed to be easy for me, I should be able to stroll into a shop and pick up a £200 dress and be all "whatever"....

If it was at all viable/ possible for me to go part time I would be doing it without hesitation.

I agree that it's bonkers. I think if we want people to accept paying high taxes, we have to offer as many universal benefits as possible. You don't become ineligible for NHS care or school places above a certain income, and I think a lot of high earned would feel more like they got a fair deal if what they got back from the state didn't decrease as their tax take increased.

I agree that if households can afford it, they should try and view it as a temporary expense. I took the hit and earned less than childcare costs for a bit, to keep my foot in the door, continue pension payments, help work towards a better job, etc, because overall we could afford to. But the astronomical costs mean lots of families can’t, and that pushes lots of women out of work, and we should still be outraged. Access to quality childcare helps to narrow the attainment gap, and it benefits all kids.

I don’t think that many people genuinely think that childcare providers charge too much - we understand that their running costs are high, and the government doesn’t properly fund the ‘free childcare’ places. Rather, the government should be properly subsidising nurseries and childminders so that they can offer affordable, quality childcare, at a reasonable cost to parents. Like they do in other countries, e.g. the Amsterdam example unthread. Nursery workers should be well paid - they have one of the most important jobs! Just not at the expense of stretched, working parents. Childcare in the uk is the most expensive in the world (? Or second most expensive, I forget which) and that’s utter madness.

Expensive childcare pushes willing and able women out of work, and that can trap women in crap/abusive relationships since they don’t have financial independence. It has a negative impact on children from certain socioeconomic backgrounds. It’s ensuring the gender pay gap doesn’t close. I could go on for ages!

People earning £100k+ pay 50% of income tax. They aren’t being subsidised by anyone else.

I think there’s a generally good question of ‘why do they have to pay in at such a high rate (62% on income at this level), to then be excluded from the benefits they fund for everyone else?

But! I digress. The main rationale in changing it, is that it actively reduces tax take. The penalty is so severe, people are changing their behaviour to earn less, and pay less tax. This is a very big problem when so much of the UK’s tax is paid by this group.

It shouldn’t be possible that you lose tens of thousands of pounds for earning a penny more. The top couple of percent of earners shouldn’t be trying to cut their incomes to claim benefits, because they’re better off. It’s completely bonkers.

Completely agree, OP. It’s such a stupid system. Maddening for people caught in this spot.

Making childcare universal isn’t a cost though! The extra tax the government gets in people not piling income into pensions or going part time pays for the extra free child care many times over. And the long term effect of going part time - even temporarily- hits your long term earnings and therefor the long term tax take.

And think of all of the intelligent, productive parents that we are not using as tax raisers. We plough money into making citizens skilled workers because then international companies invest in the UK and we reap the benefits. Yet the government still wants to disincentivise working.

Old days? How long ago are you talking? Do you mean during a time when it was easy for a family to survive on one wage, so if both parents chose to go to work, childcare was actually affordable…?

Because the government are idiotic.

And they won’t change this policy as the ‘rebel MPs’ are thick as mince and don’t understand that giving benefits to rich people helps us all.

It is a fundamentally flawed tax system, littered with cliff edges and disincentives to work. I totally agree, OP.
It perpetuates inequality as it discourages women from re-entering the workforce.
It also makes no sense financially. There are reports showing funding childcare has a net positive financial impact given tax revenues.

The peasants that don't understand tax will be along to leather you any minute!

The most confusing part is that the Tories were really the architects of this - 14 years and they didn’t move the 62% tax rate, and they introduced the £100k cap for free hours in 2017, and extended the free hours provision (and it’s the 30 free hours from 9 months which has made it really stupid).

Did no one do the calculations? What did they think would happen?

Agree with your point that two people on £99k can claim but one person on 100k can’t and surely it makes sense to do it based on whole household income

i suppose there needs to be a cut off point? Where does it end £150k?, £200k?

I don’t agree with your comment about ‘being punished for trying to do well’. Having a high wage doesn’t automatically mean you have done well and if you don’t then you haven’t. Some people have had such shit lives that them even having a part time job on minimum wage is a extraordinary and trust me they have done WELL

https://www.ippr.org/media-office/a-universal-childcare-guarantee-for-children-up-to-11-would-boost-economy-by-extra-13-billion-a-year-report-finds

Please explain why there HAS to be a cut off point?