Childcare when earning over 100k

[Bathroomwoes]

There have been a few threads on this topic but none of them seem to bring together all the issues in one place. I'm currently earning just under 100k and am looking to change jobs. I'm looking for a sizeable salary increase to move and am mostly looking at roles in the 110-130 band (not actually received an offer yet but this is market pay for my level and role). What I've realised is that If the taxable income goes over 100k I lose 4k in tax free childcare and I also lose the 30 hrs free childcare I've been counting on, which I would otherwise be getting in a year. We're currently paying a fortune in childcare (combo of nanny and childminder) and I was really looking forward to actually having some disposable income again as we are having to be quite careful and put many costs on hold.

I calculate the total cost of those childcare support losses in the region of 7k. If my taxable income is around 123k then I'd lose my personal allowance too. Therefore of that 23k I'd effectively keep nothing?? I know I can mitigate by making extra pensions payments etc but that probably only applies up to a max income of 115 - 120k as I wouldn't want to be putting huge sums into pension. One thing that could help is leasing a low-tax model of car as we do desperately need a new car. Does anyone know more about how this works and whether it is universally available or only in some companies?

The issue for me is that If I go for one of these higher paying roles I will have to work harder and have less flexibility in my work. I'll need to spend more on childcare and more to manage our family life in order to hopefully maintain the quality of our family life. It's making me think I should actively avoid roles paying between 120 - 140 and only apply for roles above or below those salaries. I know it seems short-sighted but my intention is only to stay in such a role for a couple of years and then quit to do something completely different. Therefore it is quite short term decision and I'd like to make as much money as possible to make it easier to then have some savings for when I change direction. If I go for a 140k+ role I can't count on having any life at all so not really keen to do that but it is an option on the table.

Thanks @farfallarocks - I feared as much. I'm a single parent and have regular commuting costs (between countries!) to pay, as well as full time childcare, mortgage, and so on. After paying into my pension, paying a hefty tax bill and paying all my fixed outgoings, I have nothing much left at the end of the month. It seems a shame that my bonus, which I work very very hard for, is basically something I don't see. Diamond shoes for some I'm sure, but in my opinion the tax system needs a radical overhaul to do more for working parents- particularly mothers and single mothers at that

It's based on taxable income - so after pension deduction but add on any taxable benefits you get (car allowance, private healthcare etc). Dividends from shares would also be included, but not gains from selling shares.

More info here: www.gov.uk/income-tax

To the people having a go at the OP - it's a perfectly reasonable and actually pretty complex question - why would anyone work longer hours or in a more stressful job for the same cash in their pocket? It's the same issue (at the other end of the scale) as the taper on tax credits, where it can make more sense to work part time than full time due to the steep taper.

The take home on £100k isn't anywhere near where people think as well- it's take home of about £5.5k a month. I'm not saying that's not a lot, but where I live that could easily be swallowed by £2k mortgage for not a particularly amazing 3 bed semi, £2k childcare, £600 commuting costs, so £900 for all food, gas, electricity, clothes, home maintenance, emergency repairs, car costs, children's after school activities etc - it's hardly living the life of Riley.

Annoyance about not seeing much extra money from quiet a big pay rise due to loss of tax allowance etc is understandable, especially if the new job takes more time and effort.

I'd agree with PPs who say that unless the new job is something you really want to do, or is a stepping stone to something even bigger, think hard about whether it really is worth it.

And if you're the main earner, you should also think hard about whether your DP could take a step back, go part time or even be a SAHP if he's not in a 'career' job that he would struggle to get back into when the DCs are at school.

The reduction/loss of his salary could be completely mitigated by not having any childcare costs and having someone available to do all the household management etc. Will make your life in the big job so much easier if the mental load of home life is mainly taken on by him.

Yes, worth considering whether DP reducing hours would assist with the childcare costs. Though as it sounds like you're not married, if I were him I wouldn't!

If you want advice specifically about leasing a particular sort of car, may be worth starting a new thread for it. This one will have attracted people who are interested in childcare costs, childcare help and tax bottlenecks. Not necessarily people who know about car leases.

Having a work provided car isn't going to help the OPs situation. Cars even 'low tax' ones (or car allowances) attract income tax, so if anything will make the situation worse.

I would probably look for a PCP deal on a small/cheap as possible car. I used to have a Skoda Citigo for £130 pm for the car (no deposit), servicing and breakdown cover so I only had to pay for insurance, road tax and petrol - the insurance and road tax were very cheap and it was fuel efficient.

Obviously a Citigo would be too small for a family, but you could probably get a Fabia for under £200 pm unless you need to do mega miles.

We need to be celebrating women who succeed financially, not knocking them and trying to score points.

The comments are not knocking working women they are questioning someone who states they have no disposable income whilst being in the top 1% of earners.

Thanks for that. I work in a man's world and it is really hard to get taken seriously, especially once you are a working mother.

Well it helps if you don't make stupid comments about disposable income which imply your financial management is inadequate.

If your question is about the logic of the tax system and some of the benefits structures then that is the question to ask. There are changes which effectively negate pay rises at certain levels and they apply to men too. Women are not treated differently from men in that respect. There are so many variables on this that you should get individual financial advice.

At this work level common to do worse tactically (whether that be in hours or increased costs) to move to the next level for better longer term opportunities. Again that also applies to men at this level.

What can be different for men at this level is they are more likely to have SAHPs which makes it easier short term to sacrifice domestic life. However I've watched plenty of those men turn into longer term divorce statistics as a result of deprioritising family for extended periods.

I was a working mother in a male dominated industry when it was almost unknown (no ladies loos in my first job), my DC are all grown now. There were plenty more barriers to me compared to men in my industry but none of them came from the HMRC - those rules always applied to both sexes, just as breaking the higher barriers demands a high price from both sexes.

28% of income tax is paid by 1% of workers, the high earners. So you can knock them but you'd have a much bigger bill yourself if they didn't pay what they do.

The biggest problem is that the Conservative government doesn't want to increase the top tax rate percentage number. This would be the simplest way to get more tax from high earners. But they don't want to be seen to be doing that. So they've done things like remove allowances (such as child benefit, personal tax allowance and pension tax relief) at 'hard stop' income levels. This creates tax traps - sudden 60%+ marginal rates at the 50k and 100k levels.

It's created a mess of tax rules that make personal financial planning very difficult. Remember that some, like the OP, only earn at these high levels for short stretches in their career.

www.telegraph.co.uk/finance/personalfinance/tax/11544301/The-chart-that-shows-there-are-12-rates-of-income-tax.html

The government should be honest about what they make high earners contribute, and they should reward their outsized contribution to public services with simpler tax rules that don't unnecessarily complicate planning.

28% of income tax is paid by 1% of workers, the high earners. So you can knock them but you'd have a much bigger bill yourself if they didn't pay what they do

Top earners also take a disproportionate amount of the incomes cake and own a disproportionate amount of the national wealth.

In fact the top 10% own more than half of the national wealth on their own. Last time I was able to find earnings stats the top 5% were earning about a third of total earnings.

Just ask top 1% if they would take a pay cut to pay less tax. And note the number who have chosen to do so.

I think 100% of people would take a pay cut if it resulted in less tax and more net pay - that would be tax planning.

I think 100% of people would take a pay cut if it resulted in less tax and more net pay - that would be tax planning.

Not unless they are in a scheme for tax avoidance such as pretending earnings are not earnings but dividends, expenses, loans etc.

Taking a pay cut if you are on PAYE will result in less tax but also less net pay.

It is perfectly legal for a director to take money from their company as a mixture of salary, dividends, pension contributions and interest payments. The only problem would be if they were using their company to disguise employment.

However, did you actually mean that people won't take a pay cut to pay more tax? I agree that most people are concerned with their own bottom line and might not like to take a pay cut to pay more tax. However they are even less likely to want to pay more tax if they don't think they benefit from the state.

Do you think the OP should send her children to private schools if she can afford to?

The £110-120k range is a well known tax trap. My dp’s payroll mucked his taxes up 3 years running due to miscalculating and leaving us with a tax bill in Jan for 2 years running.

You need to think about what you are after long term - you express reluctance about the jobs paying £140k + but that is where you are heading, no? The advice to go ft and punch on through is what I would do if I wanted that life.

If you want to meander pt for a few years at a lower level, I agree you’d be better stating that and asking for every other Friday off etc.
And you need to see someone that can help you factor in all the costs and see where your happy spot is.

I agree with barbara too, look at your dh’s career too and make decisions for the family as a whole to maximise happiness and money both for now and 5 years down the line. Most people don’t do anywhere near enough planning (myself included) and there is no magic point where children don’t need a lot of input from someone.

I don't think it is possible to receive less net pay from a higher salary, but at certain points, the marginal tax rate is very high, so the extra net pay from any particular salary increase might be very small.

The worst is probably at just above £100k, and also a hypothetical situation where someone going from £50k to £60k would lost 40% of the extra £10k in tax, some in NI, extra pension contributions, but obviously would get that back in their pension (if they live that long of course) possibly another 9% in student loans and if they had DCs, all their CB. If they have several DCs, that might be the only situation where they would actually be worse off at £60k than £50k.

If they had 5 DCs thats £72? pw or £3744 per year in CB, plus £4k in tax, £900 in student loans, so that's £8644 plus whatever extra in NI and pension they pay, so yes someone with a large family and student loans going from £50k to £60k could actually be worse off on the higher salary.

But then again, how long have the 9% above £2Xk student loans system been in place? Possibly someone old enough to have several DCs and a £60k salary won't often have that type of student loan?

You want advice in tax avoidance?

The only problem would be if they were using their company to disguise employment.

Which is pretty much standard behaviour amongst contract workers in higher paid positions. Its no secret that one of the commoner reasons for contracting in some higher paid industries is because its a lot easier to avoid taxes. So people carry on doing the same job, often with no less security these days and not much loss of benefits, but can avoid a lot of the tax. Sometimes they get stupid or greedy and you end up in the fake loans scenario.

Do you think the OP should send her children to private schools if she can afford to?

What on earth does that have to do with the question in hand? Its about taxation not schooling.

I've already explained the disposable income comment so I'm not going to dwell on that further except to say that I don't regard basic monthly savings for a future safety net as disposable income. Anyway I didn't come on here to talk about how I spend my money but about what type of job it is worth me aiming for in the context of pay brackets, tax and impact on personal life. My general conclusion is that it's not worth going for the 120k+ jobs as the extra hours and pressure and the resultant knock on effect on family life and personal well-being don't make it worth it as a short term choice given the marginal amount of extra income it provides. I guess if I stay in the field, the less of childcare help will no longer be an issue in a few years so I won't feel the loss of that support if I go on to earn more in future.

Re DP/DH I don't want to say too much as it doesn't relate directly to my question and I don't want to out myself, but just to say he does work flexibly to enable me to continue in my profession however due to various factors (and not just because he doesn't want to or isn't willing to push boundaries), taking full responsibility for child minder drop offs and/or pick ups isn't an option. A nanny significantly improved the quality of life of our children and also means that it's not a problem if we're both occasionally late. She also does light housework for us which really makes a difference when you're often having to pick up work in the evening.

He's not interested in going part time and I can understand that and am happy to support him in that choice. Of course it would be good if more DPs did the same for their other halves too and we would have a more equal workforce.

Which is pretty much standard behaviour amongst contract workers in higher paid positions.

That is breaking the law, but not all company directors are using their company to disguise employment.

What on earth does that have to do with the question in hand?

Why should the state fund education for over 4s but not under 4s?

I would look to lower childcare costs by having a good au pair. Be picky. My friend has had excellent ones because she picks those from middle upper income groups who have a good level of education. You should expect to have significant childcare expenses always unless your DP is willing to drop hours. As you aren't married I don't think it's fair to expect them to drop their hours.

If you did an au pair combined with nursery I would imagine your costs would be lower than your current set up.

Career wise make it clear this is a stepping stone and you expect subsequent pay increases. After all that is what men do. Personally I need £165k+ a year pretty quick after passing the £100k mark because I have 3DC, two of whom need more specialized help. It's a big reason as to why we still live abroad.

To the others on here with their bitchy comments, keep your comments to yourself. £100k after taxes is about £65k a year. It isn't much when you have student loans, childcare costs etc. that all have to be paid for.

Why should the state fund education for over 4s but not under 4s?

Childcare != Education provision.

I also still don't see what it has to do with the decision. There are pros and cons to this particular jump with or without losing state provision of childcare. There always has been, including when I was at this point, long before any form of state childcare existed.

I've already explained the disposable income comment so I'm not going to dwell on that further except to say that I don't regard basic monthly savings for a future safety net as disposable income

Well that's nice but complaining you don't have disposable income when in fact you have substantial disposable income isn't going to get you much sympathy when most people raise families on a fraction of your income.

To the others on here with their bitchy comments, keep your comments to yourself. £100k after taxes is about £65k a year. It isn't much when you have student loans, childcare costs etc. that all have to be paid for

Oh rubbish. You think people living on normal incomes don't have to pay student loans and childcare? When I was at this point career wise there was no state funded childcare of any kind and the disincentives for shifting were higher. We have some of the lowest tax rates for high earners in Europe.

Question the apparent oddities in the tax system by all means but its insulting when people in this bracket pretend to be hard done by. We are immensely fortunate compared to the majority.

Well as a higher earner posters were shocked when I said basics run at £6k a month for my 3DC. It's so high because I'm working 50-60 hours plus I have afterwork commitments I must attend too. I work in a major city and need to live close by so I can make it to school meetings and the numerous therapy and doctor appointments my DC have. There have been months when I've spent £4500 on childcare because of the sheer number of hours. That leaves me with £1k for everything else. I couldn't sustain such high costs as a single parent because housing and transportation would finish me off.

Fuckin ell op what's your job

It's so high because I'm working 50-60 hours plus I have afterwork commitments I must attend too. I work in a major city and need to live close by

Again also true of people earning far less. How do you think they manage?

When I was doing this (in London, a fairly major city) there was no state funded childcare and zero workplace support or sympathy or even paid mat leave for working mothers. Tax rates were also higher.

Another change has been the erosion of protections and supports for low paid women whilst their higher paid sisters can often access workplace retention schemes, paid mat leave, family leave etc. However you cut it, we are not hard done by.

Honestly I never said I was hard done by or asked for sympathy. I agree low paid women often work as hard and have greater struggles to manage on tighter margins. I'm still left with a question as to how to balance my working life with my family life and money impacts on the latter in terms of enabling me to increase quality time with my family. Low income or high income, all children deserve some time with their parents and everyone deserves a bit of relaxation time.