Paid Childcare on over £100k

[BebeBelle]

Hi all, I don’t normally post on here but only looking for advice on people who have helpful comments and have been in this situation. My baby is 9 months and started going to the child minders when I went back to work part time. We’ve been paying childcare ourselves and childminder has said we are eligible for the code. My husband earns about £130k before tax including benefits. I’ve gone back to work part time 3 days a week and will be earning about £1.3k a month (had to take a low paying and less demanding job) which will almost mainly be for childcare.
I’m not looking for people to tell me that this is a lot… because for us it isn’t after the very high tax bills etc, so I just want to find out if there is a way we can get child care support. We have no family near by and do everything ourselves and if we have any emergencies we have to pay for baby sitters etc. my husband works away, long hours, pays travel and accommodation so our monthly bills are quite high at the moment as he is in a niche industry and can only work in places where we can’t move to for now. Can anyone with advice please help on getting childcare help please let me know the best way to go about it. Many thanks in advance.

If you're talking about the 30hrs and tax-free childcare, your DH needs to pay £30k a year in pension contributions (or enough to take his taxable income below £100k) and you should be eligible (if you meet the other criteria).

Pay the 30k into your husbands pension. It's a shit system if one of you is a much higher earner than the other (this is our situation). At least on your income you are paying much less tax on what you earn.

@UnPetitDunPetit, thanks so much for getting back to me. Is that £30k including his employers contribution? And is it just pension deductions or do they consider salary sacrifice deductions for other things as well.

No, the employer pension contribution isn't relevant (unless it's salary sacrifice). It's all to do with what your DH's adjusted net income is: https://www.gov.uk/free-childcare-if-working/check-youre-eligible

Essentially your husband needs his adjusted net income to be under £100k to
qualify for funded childcare.

Assuming he earns £130,000 (including his work benefits (healthcare, critical illness for example) - those that you’d see on a P11D), then let’s say he salary sacrificed ££31k, then his adjusted net income would be £99k.

Remember if he gets a bonus then this pushes up the figure.

There may be other ways to reduce adjusted net income that his work may offer. Green car EV leasing is one; he can salary sacrifice the amount, reduce adjusted net income and drive a brand new vehicle.

@Allswellthatendswelll thanks so much. Yeah absolutely not fair from that point. Other people who earn more jointly but on under £100k would qualify. Will look into the increase in pension. Would they need to see these deductions on a pay slip first before we apply for the code?

Thanks for that @UnPetitDunPetit that’s helpful.

Most people would put an additional £30k into pension to take them below the £100k threshold. However, this will become taxed in April 2029, which will be before your child starts school. So you’ll need to work out a different situation such as your husband taking a lower paid job and not having to pay for travel and accommodation out of his salary. Or working out how much tax you’ll pay or paying the childcare and not doing the full salary sacrifice.

Also, your salary alone is not paying for childcare. It’s a joint expense. Salary sacrifice for his salary into your pension doesn’t work to bring him under the £100k but if you’ve taken a lower paid and part time job, the other family expense should be topping up your lost pension contributions. Especially as your husband’s pension pot is growing to grow significantly in the next 2.5 years. In the salary sacrifice vs childcare costs you should also add in the additional pension contributions for you too.

@DappledOliveGrovesthanks so much for this information. He mentioned about the car but I don’t realise it was actually a thing. I will get him to talk to his workplace to see what his work also offers for ways to reduce net income as we didn’t think of this as an option. Thanks so much.

No it won’t be taxed. The salary sacrifice will be limited to £2k before NI is charged on it. Income tax remains the same as now.

You may not want to be told it, but £130k, whatever the tax bill, plus the ~£16k you must earn is a lot of money. There must be some way you can economise if you have so little left you need the tax payer to subsidise you.

My dh asked not to get a payrise or bonus one year, as it would have cost us more than the lost childcare! Employer very kindly saved it and paid it out the following year (at which point dc was at school).

It is a stupid system isn’t it op.

@FlamingBananaaww thanks so much. So many good points to think about. Yeah once we have this part sorted we definitely need to be thinking about 2029 🤯.

Yeah, the childcare is definitely joint, we do everything joint but just that my earnings amount almost disappear with the childcare cost we jointly do everything.
I didn’t think about increasing my pension contribution either but I will look into this. Thanks so much. Really appreciate it.

Thanks @LittleBearPad

@TheSmallAssassin, I appreciate you being polite with your comment here. I understand where you are coming from but everything is subjective. Until you walk in my shoes and I walk in yours that’s when we can all truly empathise with each other but for now this is my situation and I need the help.

They are the tax payer.

@NemoNerd, it really is. Your husband was very fortunate in that situation but isn’t it sad that it even has to come to that.

We're all tax payers.

@mtobrokemegood point.

It's definitely worth trying to get his adjusted net income under £100k. You will get the 30 hours funding plus the 20% tax free childcare top up. So these benefits, together with the higher marginal tax rate on the 100-125k earnings means you will have pretty much the same amount left over at the end of the month but you get the advantage of paying more into pensions.
It may not be an entirely "fair" system but these are the current rules so you may as well try and work it to your best advantage.

Some more than others.

Hi OP,

mr and my husband have a very similar problem , except I have three children in nursery (twins 1 yo and a 2 yo). We funnel as much of his salary into pension as we can to bring it below 100k. We’ve also found a scheme that he was able to ask his employer to sign up to. Most people in the higher tax bracket are aware of this pension thing. There is something else and I have only come across a few people using it , we’re using it (even with the free hours the fees would be completely unsustainable for 3!). It’s called the workplace nursery scheme. My partner asked his workplace to register for it, so your husbands workplace would need to register and there are some faffy parts to it- but if he’s a valued employee they might agree. Essentially our nursery fees are paid for by his workplace, and then deducted from his salary before tax, so his salary is lower but we’re saving hundreds on nursery fees each month. For us it actually also meant we could pull his salary below the 100k without using the pension because his gross income was less once the nursery fees were deducted.

anyway, it was a bit of a long shot for us but it paid off!

Also just to add to this, because I know there are lots of opinions on taxes or ‘dodging taxes’. I am in a senior position in public services, and despite us doing all of the above our nursery fees are still very high and we are essentially
paying more for the nursery fees than my salary is. So right now I am literally paying to go to work.

@QuaintGreenFawnthanks for that additional information. That’s good to know about the 20%, I really wish there was a specific section on this on their website to clearly explain these things.

@Malianwethanks so much. That’s very interesting. I will let my husband know. I honestly didn’t look more into this as I just thought with my husband being over the 100k, we didn’t meet the criteria. I’m so grateful to all the helpful responses. Congrats on the twins as well 😁😁