Tories campaigning to remove the childcare maximum income threshold

[FlakyPastries]

Kemi Badenoch has announced that the Tories want to remove the upper income threshold on childcare.

This means all working families will be able to claim it, including those earning over £100k.

Do you agree with this policy?

My baby’s nursery charges £30,000 and the free hours and tax free childcare is worth around £15,000 - so this is quite a significant benefit for those currently unable to claim.

It is not free childcare it is funded. It is only funded for 30hrs a week for 38 weeks of the year

What does this add to the conversation?

Not entirely sure what prize you’re hoping to “win” here… Perhaps the prize for most spectacularly missing the point?

No. £125k pa is 39% tax. Plus you get taxed on private medical etc which isn’t reflected in. Plus many people with childcare and these salaries in their 30’s are paying the 9% student loan on top of this. So it’s a huge amount deducted at an expensive time in life with student loans, buying a house, paying childcare etc all coming at once. A little grace here for these people would go a long way.

Plus it would probably be a net win for the treasury, as forecast amounts would mean this is likely to be cost neutral or a small cost benefit

Yes I agree, but the problem is that politicians are more interested in optics - what appears most fair to the most amount of people. VAT on school fees had the Labour core clapping like seals, even if its only achievement is sticking it to the middle classes. And we've seen on this thread that many voters are more concerned with milking middle-high earners than they are with economic growth, even if the cost is neutral.

Not just that, but also increased economic activity (by people working more) could grow the economy, which in turn would raise tax revenue from lots of other people too!

Or detrimental.

I agree. As I said upthread, sometimes, the country (well all countries) need the people/business rather than the tax they can be screwed for.

Look at all the tax havens and lower tax countries.

Look at the London Olympics where HMRC had to do "sweetheart deals" with some athletes to exempt them from UK taxes otherwise they'd threatened not to attend the games!

Prior to that, in Blair/Brown's era, they did "sweetheart deals" with Vodafone and Goldman Sachs and a few other secret deals where they were let off huge amounts of tax otherwise due effectively "for the greater good".

More recently, Tyson Fury hasn't left the UK to become resident in Isle of Man because he likes steam trains and horse drawn trams! It's because he wants to avoid paying UK tax rates and would rather pay much smaller amounts of tax to the IOM government instead.

Just that we are talking about a very tiny minority of very privileged people. Most of whom can probably afford clever financial advisers who will no doubt help them to dodge as much tax as humanly possible.

We work hard to decrease the group that earn and pay more. It’s a small number but let’s shrink it.

It’s not a tiny minority. It’s 2.06 m people this financial year, and there are (as evidenced by this thread) lots of other people who adjust their net income with part time or salary sacrifice to stay under the limit and so aren’t counted in these figures. If those people were paying full tax and working full time, the productivity benefits would be huge right now.

instead I guess we’ll get the tax in 30-40 years when they draw down their pension 🤣

Exactly. Wouldn’t it be better if we had a simple, broad tax system where people weren’t incentivised to duck it?

What kind of advice and tax avoidance schemes do you think these people on £100-160k are going to have access to exactly?

Most of them will be PAYE.

Yes! The usual "advice" will be to reduce their working hours to bring pay back under £100k or to shovel as much as possible into pensions to bring income back under £100k.

Not much else your average GP, consultant or dentist on PAYE can do really.

Of course, for the likes of self employed IT consultants, they can more easily just move abroad, but carry on doing the same work for the same UK "employer", but can avoid UK tax completely if non resident, effectively "working from home" in a different country with more favourable tax systems. That's what IR35 caused - so the UK ended up with zilch in tax by trying to squeeze a bit more out of relatively high earners. IR35 also screwed the NHS who had previously used a lot of self employed locum doctors/consultants/radiologists etc who, likewise, chose to work fewer shifts once they had to be paid through PAYE, especially those earning just over the £100k level!!

What do you call reducing hours and stuffing pensions if not tax avoidance?

I'm talking about people who are actually paying 40% of their income in tax and NI, which was referenced in the post that I originally responded to. Are you trying to tell me that you think that there are 2.06m of these people?

Because if you are, I think you're wrong.

Those aren't tax avoidance scheme and you don't need to engage tax specialists to know about it, as it's common knowledge, spread readily through workplaces by those affected.

Likewise you wouldn't say that someone working part time on minimum wage topped up by universal credit and other benefits was engaged in "tax avoidance" when they refused the option of taking an extra shift if it meant they were worse off due to the double whammy of reduced benefits at the same time as tax/nic on the extra wages. Likewise, that's just common sense, and again, exactly the kind of thing talked about in the staff room.

These aren't tax avoidance schemes, it's just normal common sense behavioural decision making.

This is muddled. Posters are saying the tax regime causes behaviour change eg working part time or putting into pensions.

Clever financial advisors aren’t needed, it’s happening due to gov policy. And it’s not good for tax receipts and other reasons.

Neither are ‘tax avoidance schemes’ and no one is paying ‘clever financial advisors’ to tell them to work less to claim childcare hours.

These aren’t the super rich squirrelling money offshore - they’ll mainly be PAYE employees with their incomes taxed at source.

I'm probably going to get flamed for my views - but I'd have more respect for the conservatives if they proposed cancelling the whole 'free' childcare thing anyway.

Why

• Unemployment is rising.
• The amount paid to childcare providers by councils doesn't cover their costs.
• I think parents (not just mums) should be encouraged to spend more time with their pre-school children.

I'd also cancel child benefit too.

To offset these

• the tax free allowance needs to raise so working people can retain more of their salary. That can be spent on nursery if desired.
• Re-introduce married / civil partnership transferring of tax allowances so SAHP aren't penalised financially for that choice.
• Unified credit allowances altered upwards for those with Children to ensure those on benefits don't lose the Child Benefit income.

What are they if not tax avoidance? The sole reason people do them is to minimise tax.

Yep it’s behaviour change due to gov policy that has a poor impact. Which is what the thread is about.

The figures aren’t broken down per each tax rate that I can see. Those figures are the forecast for this financial year for the people earning over £100k. So presumably those people aren’t keeping their adjusted net salary under the £100k threshold.

How do you envision cancelling the childcare schemes will improve rising unemployment?

Where do you see the personal allowance rising to to help families pay for this childcare, noting the support might be £10k+ a year, and an average earner pays about £6k a year in income tax + NI.

?