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?!

Exactly @ant1234 .. it all depends on individual circumstances and it seems a shame to game the system BUT there are flaws in it (the one earner at 100k v 2 earners at 99,999k as mentioned below for example) so we look at it on a yearly basis and work out what's best to do.

The variables for us are kids ages, how much over 100k we go (it's usually bonus that does it), and plans for that year financially and personally..

Tapering means she would gets taxed on anything over 40k...

System makes no sense imo

People should never be disincentivised to work!

I hate this ridiculous attitude that if earning £150k you don't need to budget and work out what makes sense economically for you?!

She is also paying a huge amount of tax, probably has a higher degree of responsibkyly than average, if she lives in the South then that salary isn't even giving her a life of luxury. If her partner earns significantly less than their live will be far from a live of luxury.

I find it bizarre that these thresholds are the same for the north v south, despite the dramatic difference in cost of living

How are you getting £99,999 as your 3 day salary?
£150k / 5 x 3 = £90,000

That’s 10k total (or £833 a month) difference.

I think the bigger pension pots are a muse and in the next 20 to 30 years state pension will be tapered depending on a persons pension income. Give with one hand take away with another. 20 and 30 year olds today prepare for no state pension for many of you. But I maybe wrong.

yes the 15 hours free for everyone from age 3 will remain.

You could be marginally better off but it is a very short term view. You will only paid for childcare for a reasonably short period of time but your career will continue after that. I would be surprised if going down to 3 days does not impact your career progression, at least where you are currently employed. Also, even if you only only getting small % increases in salary it will increase fairly quickly.
You have mentioned you put £30k into your pension, does your employer not contribute?

I agree that people on higher incomes still need to budget and there’s a big north/south divide.

But 150k really is a very good salary wherever you are. Especially if you have a partner who is also earning.

This has been such a useful thread to read through, thank you. We are in a similar position in a commuter town just outside London. I earn £59k, my husband earns £61k. We have no family near us so would be reliant on childcare. We have agreed that if we have a child, we would both need to compress our hours and only use childcare for 3 days a week. Even then, with the costs of living in the SE, paying over a £1k a month for 3 days of childcare makes a huge impact on our budget and whether we can afford a child.

I’m glad this policy has been announced (let’s see if the Tories actually enact it though) and I hope it ultimately helps more women back into work

I have not had to look at these scheme as my children are student age etc but above is correct (I just checked) for those with 3 y ear olds the 15 (not 30) free hours is regardl ess of income "
15 hours free childcare for 3 and 4-year-olds

This scheme is universal and open to all 3 and 4-year olds. There are no earnings or work requirements." workingfamilies.org.uk/articles/free-childcare-for-children-aged-two-three-and-four/ whereas the 30 hours is just for those on the lower incomes.

However the 15 free hours (never mind 30) is not always that useful to parents needing due to travel at least 10 hours x 5 days = 50 hours and because nurseries cannot easily afford it so they give with one hand and take with another such that the "free" hours are not really that free or just a few hundred pounds off a huge weekiy 50 hour childcare cost.

On the more general point on the thread I am appalled at the way we have chipped away at what higher earners get including no child benefit, single person tax alloance goes, no £2k a year per child childcare thing, no 30 free hours etc etc as if they are hated pariahs rather than in the older days - we are all in this together and you get child benefit no matter what you earn. Those days are long gone.

£100k single mother in London has net pay of 5500 a month, rent is likely to be ast least £2000 a month. Child care for one baby at nursery likely to be £22k full time so about 1833. If she is a new graduate she might well have 9% graduate tax to come off the 5500 too - say £600 a month. So that leave her from the 100k £1067 a month for work clothes, work travel costs, babysitting when she works late, all her food, heating, mobile, council tax., No one will ever feel sorry for someone with £5500 a month before heating costs but that we penalise in effect people in the South East so badly makes me want us to declare independence from rest of UK for those of us within the M25 and set out own tax rates.

Very few people are in this position so I don't think they are going to be making policies for this exact scenario. Yes your numbers add up

@Xenia for the reasons stated above, not as great as you think!

Between £100-130k you end up with a 60%+ tax rate, which is crazy.

I think the marginal tax rate and any level should always be capped at 50%.

No one should ever earn a £1 where they are earning more for the government than themselves!

It's difficult to get sympathy for high earners in the current climate. But I think that it's mad that a single person on a 100K income pays exactly the same tax as someone who's supporting four people on that income. No other developed country has this set-up.

Exactly! This is what I was trying to say upthread. Even if these people would hypothetically be better off reducing to three days, most of them won’t (the OP has said as much herself). So why would it influence the policy.

don't all these extra government subsidised hours rather presume that enough money flows to the nurseries for them to stay open? I've always thought that the free age 3 - 4 hours were significantly topped up by the charges paid by parents of the under 3s as the government funds were woefully inadequate. If everyone over age 1 gets the same low rate of funding from the government, and age 1 - 2 need a higher staff ratio, I'm not seeing how the maths add up to staff being paid and bills being overed by the nurseries.

We've three children and my husband worked out that last year alone we'd have saved £22K of on the 30hrs scheme.
The children are 4,3, and 3.

This is exactly my situation - I earn just over £100k and a single mum with no outside support. It's not a choice whether I go back to work or not and the costs are hard to manage. The £5500 doesn't take into account mandatoy pension deductions either. At £100k you are not elegible for any child support help and it feels unfair where you have 2 parents earning £50k each, actually take home more than I do and yet they can get access to lots of things I don't.

I think it feels like a bit of a kick in the teeth to exclude high earning single parents, especially when we pay so much tax. I'm looking for a way to reduce my income via pension contributions or less hours since the free hours are worth way more than the extra I make.

Overall I'm glad they're introducing extra support though.

Bunny I agree. I am not sure how useful the new support will be even for those who get it because if parents of 1 and 2 year olds currently subsidise the 30 (or 15) hours for the older children in a nursery and no longer will be doing so then the nursery fees presumably for everyone will go up to "cover" the free hours.

If that means the £5500 net pay a month higher earner who gets just about nothing pays more for her 1 year old's nursery place (but does not get the free hours) may be there need to be nurseries where only those who earn over £100k a year go and no parents get more than the 15 free hours for older children and then perhaps the economics of a particular nursery might be fairer to higher earners.

Appreciate this is slightly outside this thread but interesting you said your PT was a nightmare!

I’m in a situation where currently on Mat leave and considering options about going back to work. I suspect in my industry although PT is available and my company likes to perceive themselves as family friendly, the realities of doing 3-4 days a week will just be me trying to squeeze 5 days of work into less days! On the flip side not sure how I feel about my DD going to nursery 5 days a week. The new measures do give a very slight financial incentives for higher earners to drop down working days though suspect that is not the intention.

Yes, this is exactly my experience! 5 days of work for 3-4 days of pay.

From speaking to friends though it does vary hugely, and your line of work is a big factor. Also, some people are just far better at setting boundaries and only working the hours in their contract (I am not one of these people).

It does seem silly, free hours should be inclusive and for everyone no matter what salary. Also seems like it would be in the government’s interest to get your 5 days worth of taxes (and higher taxes to boot), rather than 3.

The Government is cutting its nose off to spite its face. All over the country people (usually mothers) sit their with calculators looking at what salary increase means no child benefit or effective 60% tax or loss of single person allowance or no 30 free hours or no £2k per child thing [those mothers earning enough to be at those income levels of course].

Even my doctor sibling (male) stopped working on Sundays at one point when the marginal tax rate went up to about 50% as why give up a whole sunday with your lovely children when the state takes back at least half of it - you might as well put your feet up with tax at that ridiculous level.