Needing to reduce income to get free childcare

[Katie1186]

Hi all,

I earn over the £100k threshold and actually would be better off if I contributed £10k into my pension to qualify for the 30 hours of child care.

Has anyone done this where you have manually contributed after being paid or do I need my employer to do this in order to reduce my income??

I know people who have had their employers do it but I don't know anyone who has had to manually do this themselves.

Thank you so much in advance!!

Nonsense, the requirement is to be working 16 hours at minimum wage. If you don’t work 16 hours why would you need 30 hours of childcare?
No low income families are subsidising the childcare of high earners 🤦‍♀️

My maths might have been a little off. But I also assumed she was taking home much more than 100k because she talks about 10K. So she’s on at least 110k. And even at 5k or less she’s hardly on the poverty line.

Those thresholds are insanely low. £185 per week. I would argue that anyone earning so little clearly isn't working many hours at all even if they're on minimum wage.They will be paying no income tax at all and contributing very little to the system. I think they need an incentive to try a little harder to either earn more per hour or work more hours before complaining that the government isn't subsidising their childcare enough. High earners are paying an awful lot in tax.

Its a great way to boost your pension. I did this for six years and my pension now looks very healthy. Whilst there is a limit on the amount you can contribute (I think £40k/year) you can also use the allowance in the years years either side. It has the additional benefit of avoiding using your personal allowance and other benefits. Six years at £40k has made a massive difference to my pension

Why on earth should someone clearly working a job that commands a very high salary be anywhere close to poverty? £5k a month is crap compensation for someone that is earning over £100k a year. The tax burden in this county is insane.

“A little off”

Even a 110k salary is nowhere near 8k.

You would need to be earning closer 200k to have a take home of £8k net after tax, student loan and a very small pension contribution.

I don't want 30 hours. I just wanted the 15 hours at two but don't earn enough. So is on a low income had to pay up front and hope UC don't fuck it up (yes I work) whilst someone on a lot higher got it free. If you don't believe this read the article on the BBC about the present childcare situation of low earners having to pay for the free hours high earners get. Luckily I have just the free hours at three.

OP, it’s your “adjusted net income” that has to be <£100k

this page shows how adjusted net income is calculated

I think pension contributions need to be paid gross (ie out of gross salary/by salary sacrifice) in order to reduce your adjusted net income, but I’m not sure.

Why can’t you pay extra pension contributions gross ie by salary sacrifice? Will your employer not do this for you?

Low for you maybe but not for MW workers. It isn't like low earners don't pay tax you know?

Yes they are. They have to pay full fees because they can't earn enough whilst high earners get the free hours

https://www.bbc.co.uk/news/articles/c8x8rznw9gyo#:~:text=England%27s%20childcare%20deserts,wanting%20spaces%20and%20more%20hours.

Where have you got £8k from?

£110k after tax isn’t £8k.

That's a good catch but OP can use her unused allowance for the last three years as well. I doubt that with just 10k over threshold she contributed more than 60k so there is an option here.

Actually lots of low earners pay very little tax due to their earnings falling within their personal allowance.

Working less than 16 hours factually isn't working much. I am flabbergasted you can claim otherwise.

Agree. What a ridiculous claim.

This thread makes me think that actually why bother working extra hours until my youngest starts school when I can work basic one day a week and enjoy the time with my children because my husband earns enough that UC will leave me alone? 🤷 If it is okay for the OP to bend the rules then so can I and other low earners.

But high earners are contributing. Low/non earners are not. It’s apples v oranges.

It’s 16 hours at minimum wage.

Don't you realise we all have this option? OP is working those extra hours that you seem to be considering to be optional, yet you think she should effectively not be paid for a chunk of them due to the insane tax cliff edge.

I don't understand why you can't see how different your two situations are morally and financially? She is a net tax contributor. It sounds like you absolutely are not. Why on earth shouldn't you work to pay your own way? OP is already paying her way and then some.

If you don’t work enough to claim the funded hours, which is 10,156 a year then you don’t pay income tax as your earnings are still well below the threshold.

Either way the requirement for 15 hours at 2 and 30 hours at 3 are the same for working parents.

Your maths and your... thinking is way off.
You're so sure about what OP can or cannot afford based on what exactly? do you know her budget?

Most importantly - just why should she work effectively for free over certain threshold? because loss of this funding combined with 62% tax rate makes it working for free if not for loss.

May be those who work 16h a week should work more?

It is perfectly legal and sensible. I bet PAYE tax on £100k is more than most of those moaning on this thread pay.

How is that the fault of the people who pay most tax? The cost of disability benefits has rocketed because more people are claiming them

I’ve not done it but think there’s a box on a tax form to include pension payments to a private pension - presumably if it was going into a work pension as AVC then HR would just deal with it all.

The top 1% pay something like 23% of all the tax so goodness knows what % is paid by the top 10%. So even diverting some funds to a pension will mean OP is paying a huge amount of tax. A large pension is taxable on the way out so there’s more in the tax pot further down the line. Nursery fees have also been driven up because of the funded hours so if OP didn’t get funded hours would once again be disproportionately affected.

What do you think this is proving?
They aren’t both working, which is clearly a fundamental requirement of a scheme which is largely referred to a funded childcare for working parents.

David from London was devastated to find out that he and his wife were not eligible for the free hours. His wife is retraining to be an occupational therapist so they aren't classed as a "working family". And London and the East of England have the highest childcare costs in England.
"We just assumed we were eligible and didn't think for a second we wouldn't be," he says. "It's just the unfairness of it… it seems to be a huge oversight.

To take home 8k a month you actually have to earn nearly 160k, so it's quite different. Either way, no, she's not on the poverty line.

However, if you earn over £100k a year and you have kids in childcare you are actually worse off until you earn over about 120k (the number vary depending on the amount that the tax free childcare / free hours saves you). Some people cut their hours and some people contribute more to a pension. The government could easily prevent this by basing the threshold on gross income (not Net Adjusted Income), but they don't because they actually don't want people working less, they want people working more, that's why they fund childcare in the first place.