AIBU- high earners now better off cutting hours following hunt childcare reforms

[ant1234]

In light of Hunts childcare reform announcements I've just run the numbers .... and as a high earner have concluded I would be £400 a month better off cutting my full time work to 3 days a week!!!

Don't get me wrong - the reforms are great for very many people and this is definitely a first world problem, but because of the 100k a year eligibility cap they are v biased against families with one high earner earning enough for a 3 bed place in the south east (ie core Tory young professionals). What am I missing?!

Numbers: current salary 150kpa. Contribute 30k pa to a pension and will pay 3800pm for childcare next yr when 2nd child arrives and in nursery (will have 2.5yr old and 9month old in sept 24). Net= 2590 per month

If go to 3 days a week and earn 99,999 I will need only 60hrs care a week (3x10)which will cost me c810 a month with the gov free 15hrs for each child factored in. Net = 2902 a month

Or is my maths all wrong?!

If the Chancellor did not want high earners to take advantage of this, he wouldn’t have increased the annual allowance and removed the lifetime allowance. Or would have reduced the earnings for eligibility.

Earners over £100k are paying a marginal tax rate of 62%. Do you think that’s in the spirit?

As PP said above, not everyone is doing a role where they are able to reduce their hours.

I don’t actually think it’s a workable policy at all for various reasons and will wait and see what happens nearer the time it’s due to be implemented.

As it is I think the whole thing has been announced with a GE in mind and therefore needs to appeal to high earners too. The criteria doesn’t really reflect the spirit it was introduced with today in the commons; removing barriers to employment with the aim of reducing economically inactive individuals and filling staff shortages in various sectors. It’s not really about who deserves what.

Again, I don’t begrudge anyone taking advantage of it but it doesn’t mean that I think it’s right from a general perspective. I don’t begrudge anyone buying their council house on a personal level, from a wider perspective I don’t agree that it should be possible at all.

Presumably OP works for money mainly and it's in Ops interests to work less for more cash? Seems like a no brainer to me.

I was trying to explain to a perplexed colleague that it was wasn't worth me working for 35k, paying 2k pm in childcare and train fare. Hint. I didn't work as a mum of young kids for pure fun.

Sorry I think I'm misreading this but you can't access 30 hours by reducing your income below £100k through pension payments, can you?

Also am I right in thinking the new 30 hours are not available in any form to those who earn over £100k?

@Justputitdown i think it’s possible but IANAL…

community.hmrc.gov.uk/customerforums/pt/42eab24d-9104-ed11-b5cf-00155d9c6b71

The new 30 hour rule will help most nurses because many won't be married to someone earning £100k.

I am a nurse and work a 9-5 job part time as we could only have one parent working unsocial hours (my husband works odd hours) and it was easier for me to get a different job. Definitely in my area (south west) we're really struggling to fill band 6 community/ specialist vacancies so there are plenty of non shift jobs available.

We are still paying off the debts from using nursery (youngest is in year 1) and this would have really helped us.

I do see where you are coming from OP.

It's unfair in the same way that the child benefit cap/loss is unfair.

These things should be based on household income, not a single income.

It's unfair that a couple earning £49,999 each can still claim full child benefit whereas only a couple with only one person working and earning £60,000 whilst the other parent is a sahp will lose child benefit fully, despite the 1st couple having a significantly higher overall income after tax.
Higher earners pay more tax into the system, which benefits everyone, so having policies that are unfair in this way don't encourage people to move up and earn more and seems very shortsighted from an economic point of view. Working longer hours in a stressful job and then ending up with less money in your pocket doesn't act as an incentive to people to take jobs or do overtime that puts them into these brackets.

it is, perhaps, a better incentive to keep incomes more equal between a couple, though.

Mumsnet really is full of bitter & twisted vipers isn’t it 🤷🏼‍♀️

I’m sure the OP didn’t want your empathy, or for your heart to bleed she was asking advice. Which she is entitled to receive without the vitriol she’s receiving from those of you who can’t bear for anyone to have more than them 😳

Yikes - can we still access the 15 hours from 3 years old if we earn over 100K? Hadn't occurred to me that might be scrapped.

My OH earns over 100K but like others we're in London and our mortgage/council tax is sky high (and soon going up by £800 per month when our fix ends)

I'm happy that policy is focused on lower earners but selfishly worried as all our plans for me going back full time rely on the 15 hours a week

I haven't run the figures to check but are you assuming that if you used 15 hours of 'free' care for each child your bill for their 30 hours of care would halve? Because that isn't how it works for most nurseries work currently. If half your hours are funded it reduces your bill but not by half, because the vast majority of nurseries charge top-up fees (which they're not allowed to call top-up fees) of some kind. We used 25 hours a week of care, got 30 free hours and still paid £300 a month, which was a big reduction but it didn't wipe the bill out.

It also particularly disadvantages high-earning single parents. I earn over £100k but only just. Childcare after tax is over 30% of my income - and I have to pay all bills on my own. I'm thinking of cutting my hours since I don't have a salary sacrafice option to pay into my pension and this help would make a massive difference.

2 parents on £90k however qualify which seems quite unfair, although understand they need to put a threshold somewhere.

Overall I think it's good they're extending childcare help though as it's crippling for so many families!

You don't need a salary sacrifice scheme, you can open a SIPP with eg Vanguard and get the same benefits

@Bunny44 you don’t need a salary sacrifice option. You just need to make your own personal pension contributions. Have a look at a provider like Vanguard you can set up yourself online.

You would make a net contribution so it would be grossed up by 25%. i.e. you pay £4k, the provider grosses it up to £5k - It is treated as a £5k gross contribution and that reduces your income by £5k.

xpost with @bumpytrumpy

I wonder if the government actually saves much by having the 100k limit- small proportion of children and introduces need for additional admin.

Tiny amount of admin I'd have thought - the vast majority of people in that band know that they're not eligible and don't apply. That's the upside of a simple cliff-edge cut off. And it saves thousands of pounds for every family you exclude.

@QuietlyConfident but every one that does qualify needs to be verified?

reading on another post that actually the 100k threshold might be scrapped (which was based on a Martin Lewis analysis)- not entirely clear based on what has been announced so far

i personally suspect the 100k limit is more political than financial. Something like 1-2% of households meet this threshold and would expect lower than average number of children under 3 (assuming peak income years happen later in life).

I do think you would get more people on board for benefits if they were universal. State pension - not controversial, everyone supports. UC or housing benefit - far more controversial around who deserves what.

I would argue they don't save that much with the 100k limit as i think most people in the 100-120 bracket will just chuck a load in their pension so they will lose out on the tax...

This madness is the same as child benefit. Two parents earning 99k can claim support with childcare, but one parent earning 100k can’t? Honestly why can’t we have some policy-makers with common sense!

Very surprised as a high earner you can do that op; very few can work part time.

I agree. In my circs I would be tempted to cut days worked (reducing tax from c 47k to 27k a year) and also put more in pension (saving more tax still). So - work less, claim more, pay less tax... not exactly the legislative objective. Not sure I will though- as I like my job and it does frankly feel a bit cheeky to game the system like that when I know others are hurting. But still- it's an interesting outcome.

This.

@NerrSnerr a southwest nurse and can’t get a part time 9-5 for love nor money. My partner is coming up to 100k and will likely go over next year with pay increases. We are extremely fortunate I know and only several years ago were nowhere near this amount. But now with a baby I can’t see anyway to be able to go back to a permanent role
as no childcare to cover long days and the fees vs what I make would be a loss

Realistically, would you actually drop down to three days though? I don’t know many people in the types of careers which pay £150k who would actually do this.

I’ve been part-time in an industry which is supposedly very supportive of flexible working and it was/is a bloody nightmare so I can’t imagine what it would like in the corporate world.