Childcare funding help - £100k threshold

[NotMyFirstCrisis]

I firstly want to acknowledge that I know I am in a very privileged position, and I probably should have thought about this more before returning from mat leave, but… mum brain!

Name change for this, I earn £110k base plus £30k commission (which is obviously dependent on sales) and need help with the 30 hours free childcare funding.

I started back at work in May, and we received funding from September as I’m putting money into my pension via work (salary sacrifice). However, that isn’t enough, so I need to put more into my SIP to bridge the gap and get my adjusted net income below £99k.

I need to put £40k into my pension. £12k goes into my workplace pension via salary sacrifice, so I need to put another £32k into my SIP.

Obviously, my bonus/commission is taxed at source, and I don’t receive the full amount in my bank account. I’ve realised I’ll only be able to save around £16k, meaning I’m £16k short because the rest has gone to the taxman.

How do people manage this? I don’t have enough savings, as they were used during my mat leave, and I can’t put any more into my workplace pension. I don’t think I can actually get below £99k, which is frustrating.

Will I need to pay back the funded childcare hours and Tax-Free Childcare from this term? I gave them verbal confirmation, and I genuinely thought I’d be able to make it work.

As I said, I understand this is a very privileged conundrum. I just want to get ahead of it, as my childcare costs will go from £800 a month to £2,100 a month. (Blooming London!)

Does anyone have any experience with this?

Thank you!

This fucking website I swear, constant benefit bashing threads a week started somebody earning an absolute stack on money, oh please help me I’m on the bones of my ass and need free childcare and everyone is there to help smh

Yes sorry it’s £28k I need to pay not 32k (I posted before my morning coffee).

I see, that makes sense, and that is less of a scary number. I could get a loan to bridge the gap (I think it would be worth while).

Literally WTF am I reading?

Only salary sacrifice can't take you under minimum wage.

Relief at source can.

And some firms do main pension as sal sac; AVCs relief at source.

Not that this is an issue, the op isn't likely to be able to pay that much in nor want to anyway.

You don't need a broker.

You'd be speaking to the broker the employer uses for their pension provision if the internal teams can't help you.

Sounds like you could benefit from a new accountant though.

Clearly that isn't the intention, as households earning 199.9k are entitled to them as long as neither individual goes over the 100k limit.

Ah I see, thank you! I will speak to my accounts/HR team and see what they say.

I really appreciate everyone taking the time to give info, lots of my colleagues are men with stay at home wives/partners (oh the dream hehe) so I didn’t know who to ask!

Yes I do need a new accountant it seems, my late husband used to deal mostly with him so it’s all new to me (I have always been PAYE and obviously this childcare situation is new!).

Yes I meant Sal sac, we are mainly Sal sac at work apart from anyone who is low salary e.g apprentices etc

Yes I already have 10% into Sal Sacrifice and they have already said I can’t put in more which was why I was stumped!

I agree. But I also disagree with tax cliff edges and I hope that this government properly changes these as they make no sense and should be tapered.

We live in strange and very unequal times when some can afford to whack more than the uk average salary into their own personal pension to reduce their salary to one that means they can claim state benefits. But my god if it’s other sorts of benefits claimants who try to “maximise” what they receive they are attacked no end and be told they are cheating the system.

Yes it’s legal and I do understand why people do it do but the availability of such schemes like salary sacrifice for god knows what should be cut. I have no choice but to pay tax, I cannot afford to reduce my monthly income to my pension so in the future, the them and us of pensioners is going to be even wider in years to come.

But @Glisgliss what OP is facing if she doesn’t bring her earnings down is potentially being worse off than if she earned 99k. That is the result of government policy, and the fact that the main outcome is that any sensible person earning between £100k and around £150k stuffs as much as thy can into their pension is entirely predictable (and rational) behaviour.

When the £100k threshold was introduced, it was a high salary. It still is, but it is the equivalent of £60k now as it has never been indexed. Would you support no tax free allowance and withdrawal of child care support from someone earning £60k?

Also, two earners earning 99k keep both their personal allowances and their childcare support - how is that justified?

This.i paid my full bonus straight into workplace pension then just had to manage any base pay over 100k

@Glisgliss Thank you for measured response.
I am sorry that benefits are bashed on this website, they shouldn’t be and I for one am glad there is a suppor net for those who do not have one.

it is unequal times, and I know how privileged I am financially. Annoyingly, I am no better off (in fact worse) if I lose funding due to cliff edge. Again, I am aware my ‘worse off’ is an extremely fortunate position. However it would be remiss of me not to utilise something that is legally allowed (not here to debate whether it is moral or not if that is okay).

I would also welcome a tapered edge.

I completely agree that it is government incompetence that has created this situation and it’s blindingly obvious it needs fixing. It’s ludicrous that the most well paid people in our society who pay shed loads of tax already are reducing hours, not spending in the economy when they might if that same amount of money were not going into their pension, and finding ways to stay in lower tax bands.

However I do stand by that doing these things amongst top earners is seen as efficiency when it is still using ways and means to claim state benefits and reduce tax that when others do is referred to cheating the system.

Not helpful at all. She's a single parent so no she's not actually earning a lot.

I agree @Glisgliss - you won’t find any benefit bashing comments /threads from me, perverse incentives exist in lots of different places and in an ideal world someone would try to erase them (the loss of carer’s allowance for going £1 over the earnings threshold is, in my view, the most egregious).

I strongly believe that some benefits (child benefit, childcare) should be universal. It breeds resentment in higher earners to not only bear the highest burden of income tax, but to then not see any of the support that others get. I would have preferred a penny (or whatever the necessary amount would be) to have been put on higher rate tax than child benefit withdrawn. I’d rather the additional 45% rate started at 100k than have a marginal rate of 60% (or higher with childcare/student loans) on income between £100k - £125k.

I’m a high earner and am not averse to paying tax, but the system needs to feel fair for everyone and at the moment there are too many idiosyncrasies at all levels.

Except for the fact that is not in fact cheating.

Thank you too for your genuinely nice post. I honestly don’t blame you and understand where you’re coming from! Hopefully reasonable tapering will be introduced soon.

(And I will probably be best to avoid general benefits and pensioner bashing threads for a while as they are definitely pretty common on here and society generally).

So if she was married and they both earned £99k you'd be absolutely fine with OP receiving the benefit?

I also agree the same things you refer to should be universal. All taxpayers should feel some benefit from their contributions however big or small.

I didn’t say it was, just that the language used is different. High earners minimise tax and maximise benefits (legally) whereas you’ve surely heard of people who say they can’t accept a job or more hours as it would cost them more or they’d lose benefits and (not my words) cheating the system? Both are concerned for their family and income.

Are you in danger of bumping up against the £60k a year limit for pensions - how much does your employer pay in?
I think a chat with HR about allowing people to SS more flexibly - I don't know why they would chose not to. We allowed one change a year - we'd have probably allowed more but we certainly didn't want to encourage someone chopping and changing.

The system does absolutely hammer single working parents though and it’s wrong.

My husband and I work 4 day weeks and get a combined amount of &170k. We also have the flexibility to have either parent do pick up. The system sets it so that we can take free hours but the OP can’t that’s madness 🤷🏻‍♀️

it doesn’t mean it’s not shit for families on benefits. I grew up in poverty and know how hard it was in the 90s and I bet it’s even harder now.

Doesn't mean OP shouldn’t ask for advice though. If she’s in London and has a take home of 7k ish then take off £2.1k on nursery. £1.5-£2k on rent/mortgage. That’s about £3k left, take off council tax/utility bills/travel and savings and paying for kids I can see how it’s not as lavish a life as it sounds.

@Glisgliss I completely understand, it is not fair that people get bashed when asking for help on benefit threads, as it is one and the same, being worse off due to a cliff edge.

I really do understand the frustration, and I am very aware my question is contentious, I just didn't know who to ask.

@Trappedinthecastofawhodunnit I didn't even think about that! My employer puts in 5% (so £500ish). I think I will be okay this year as my commission has been lower as I was doing reduced days and using my holiday pay after maternity leave. I have emailed HR so hopefully they come back with something useful.

@nellly Thank you, I really appreciate this comment. When we planned for children we were a duel income family so trying to navigate this on my own has been on hell of a learning curve.

I genuinely didn't want to upset/annoy anyone with this post, I apologise if I have! I just wanted to make sure I was being financially savvy.

You can "bring forward" up to three years of previous unused allowance. So, the £60k (though it actually doesn't look like the op will go over it,) plus whatever allowance you didn't use three years ago, subject also to the earnings cap.

Re sal sac and why employers cap it - there are very valid business reasons to limit what can go into the pension via salary sacrifice and at what point to say additional contributions are 'relief at source' instead. I've set up several pension schemes for employers and I always suggest they cap the sal sac part.

As for "chopping and changing" - funnily enough, the HMRC rules around salary sacrifice say you can only make a change with a life event, which is a limited list of things. So having AVCs outside that is helpful for the employee. If it's set up so it's fine through a portal then it's no bother to the employer at all, it happens automatically at payroll.

I used to change mine almost monthly to keep under the limit and keep me under the higher rate tax band.