>£100k salary and funded childcare

[UncleBunclesHouse]

I hope someone with a better grasp of all this can help as I’m terrible with numbers and tying myself in knots.

I earn £150k plus bonus comes to about 180

I am able to pay over the annual allowance into pension this tax year and next due to underpayment in recent years (mat leave/phased return etc) to bring my net taxable to under £100k

Youngest DC about to turn 3, if I do this I’ll get the 30 hours, will I also be entitled to tax free childcare??

Next point is that I haven’t been doing this so far, so would take decrease in pay to the tune of I think around £800 a month. I’m not sure if I can afford it, but I really want to do it because I think the offset of childcare funding would make up some of this.

Would really appreciate hearing from someone in a similar position, all I can find about this seems to be people in the early 100k range , for which it has very little impact on take home. Over £150k it seems to affect income more?

As is mentioned repeatedly on every single teacher-bashing thread, "plenty of professions require 20+ hrs unpaid overtime each week."

So apparently, millions of people already do.

Totally and I suspect intentionally missing the point.

Thanks for all the constructive replies

I’ve worked out the saving will amount to approximately £1000 a month @30 hours, compared to paying 100% as I do now. So saving a little more than I’d ‘lose’ in theory (although putting in pension is not really losing!) The other costs that fall outside this would still add up to a fair amount as there are things like swimming lessons included. However thinking in terms of the PP that I’ll get the 15 anyway makes it less clear.

In terms of spending, it would make things a little tight but only temporarily obviously, as this will all be irrelevant when youngest DC turns 5.

As a policy it is designed to support struggling working families

No, it isn’t. It’s designed to keep women in work to increase GDP. “Supporting struggling working families” is a welcome side effect which is exploited for votes and public good will, but is not the primary intention of the policy.

For those who are doubtful about this, HMRC confirmed to me it is perfectly ok to to pay extra salary into pension to stay below the £100k threshold.

OP have you asked the nursery the costs for 15 v 30 or have you worked it out yourself? Just because people apply it differently.

At mine the difference between 15 and 30 hours, stretched over the 51 weeks with tax free childcare is just under £500 so £1000 seems like a lot (SE London for context)

On that salary I’m not sure it’s worth it to sacrifice that much salary for an extra 15 hours and tax free childcare. It would be different if you were not far over the 100k. Have you worked out how much the nursery fees would be with 30 hours and tax free childcare? The savings rate down as much as parents think they’ll be.

This would be my thought too. Have you asked the nursery? Because £1000 p/m seems very high.

We’re in a similar position to you, don’t qualify for 30 hours, won’t qualify for 15 hours for another year, and nursery have put up their prices 20% to cover the cost of implementing this new scheme. It’s all good and well for people to be all “yah boo sucks” about this but if you pay in to the system you’re entitled to do things within the law to avoid paying more than you have to.

When does your child turn 3 @UncleBunclesHouse ? When is the payment due to be paid? Could you delay? If I were you at this point I'd have set myself up as a business and moved away from PAYE

I'm at the lower end of 6 figures and tbh given you've only got one child eligible for childcare support/nursery age . Sacrificing £80k to effectively get £14k (£2k = max 20% tax free childcare per annum, £12k 30hrs (used your calc) is ludacris.

Even if you add in the lost £12.5k personal allowance you are still better off with money in your account each month to pay mortgage, clubs, high interest savings account etc unless that is already being paid with other family money. Pension is all well and good but unless you have a DB pension that is being matched by employer I wouldn't bother.

How much are your child care fees?

Does anyone know how the following works? If you pay everything over the £99.9k into your pension, and then claim back the tax relief in your self assessment, can you can keep the tax relief when it's repaid or do you have to pay that into your pension also. Would that count as going over £100k?

I think on that salary you'd get £40k+ tax relief (20% automatically topping up your pension, and then you could claim back in your self assessment the rest) Thats roughly 62% for £23k of it, then 40% for 123k to £150k, and then 45% for £150k to £180k.

I've two children, youngest is a newborn, but I've been wondering about this also. Our childcare bill will be almost £4K a month when we're both back at work and it's a lot. Plus the 62% tax paid

The free hours aren’t a direct reduction as there are top ups they put on and the funded hours only cover term time, so this will need to be aggregated out. There is also a cap on the tax free allowance. A friend of mine has said that her nursery bill hasn’t really reduced that much from the free 30hrs. I think she said it went from £2800 to £2400 so not a massive difference. I would ask the nursery first and see what the real savings would be.

It might not be worth it, especially if you think finances are going to be tight with the reduction in salary.

“When does your child turn 3 @UncleBunclesHouse ? When is the payment due to be paid? Could you delay? If I were you at this point I'd have set myself up as a business and moved away from PAYE”

If OP does all her work for a
single entity, such as a bank, or a comakbg where she is eg COO,she would not be able to set up as a contractor or avoid PAYE.

Sweet Jesus what’s with the race to the bottom? We should all suffer equally, seriously?

I have no advice on the tax situation but actually to see a woman making a good income, with young kids and knowing she’ll have a good pension pot to rely on in the future is fucking great.

The government’s shit schemes, ploughing money into their buddies’ hustles and running the country to its knees ain’t the OP’s fault.

The pension max contributions in 2024/2025 are £60k so if you are likely to get the same bonus or if your employer contributes to your pension on base salary then you’ll likely be over the limit whatever you do. so you’ll lose the additional 15 hours of childcare provision and the 20% added at source anyway. Also it will also be tricky to get yourself materially below the 125k mark that means you’ll can’t even avoid the 100-125k tax cliff edge.

I’d say save more into your pension for your pensions sake but youll
not be able to do so in order to make your free childcare provision better than the 15 hours so don’t take that into consideration.

@PineapplePizzaz you can carry over the £60k allowances from the previous three years if they haven't been used

My salary was such that I reduced to 4 days when my children were in nursery and then increased to 5 days as soon as they started school. This cliff edge doesn't make much sense.

You keep the tax relief you receive back through your self assessment. It all depends on your taxable gross through your employer minus any pension contributions in that period (amount before tax relief added at source I believe). It still stands that the pension cap in this year is 60k and that includes employer contributions.

I believe paying into pension to reduce pay to below 100k only works on a salary sacrifice pension.

@Pearsplums you can do a SIPP (self invested pension) alongside your employer pension, and it doesn't need to be salary sacrifice. You just provide pension details when you do your self assessment. It means you can put one lump sum into your SIPP at the end of the tax year, and then put your self assessment straight in to get the tax relief money back.

I was wondering if the tax relief would count as 'income' for the £100k cliff edge

Couple of thoughts/questions that I don't think have been raised so far:

Do you have older children in wraparound or holiday childcare? Because you would save on tax-free childcare with that too so should factor it in

Would you value/want to/be able to go part time? That's what we do to get down to under £100k

@UncleBunclesHouse I'd probably ask an accountant to let you know the sums and rules exactly based on your salary and circumstances. I paid £170 a few years ago before children for a forecast.

For your £800 a month you will get £40k plus back in pension tax reliefs. Plus tax free childcare. Plus free hours.

You can ask them if you have to pay monthly, or whether you can do a SIPP before the end of the tax year.

My understanding is that it has to be salary sacrifice to qualify for the tax free childcare ie the recipient can never actually have received the salary. But I could be wrong and would definitely check in your shoes, OP.

Nope - the limited resources largely come from people like her. She can and should maximise the system to get the most out of it.

Just to add the point that this is the situation that every single full time nhs consultant finds themselves in a year or two into the job. Except there's almost no prospect of powering through the £150k barrier without doing a large amount of private work, and no mechanism of reducing net adjusted income other than reducing hours, or, charitable donations.

SIPP isnt really a consistently available option as the nhs pension growth calculations mean most need to retain their carry over for the years there is a pay increment....

I think the cliff edges arent only unfair, but maliciously designed to keep us plebs in our place and put barriers up to stop normal people accidentally mixing with the elite.

Of course it is. Those of us who have been in a similar position know the rules inside out. For some reason certain misinformed posters believe they know better.