New childcare tax break to be announced by the Government today - what do you think?

[JaneGMumsnet]

David Cameron and Nick Clegg are due to unveil new childcare plans in a joint press conference today, with further detail expected to follow next week.

According to reports, families could be entitled to claim up to £2,000 per child every year from their tax bills, to cover the cost of childminders and nurseries as part of a new government scheme to help families.

The new measures will not be means tested, and will replace the current voucher and allowances scheme.

We'd be interested to hear what you think of these proposed changes, particularly in the light of the changes to child benefit which have been implemented today.

Thanks,

MNHQ

Curryeater,
How old is the DD who is in need of clothes? (just wondering if I might have some to spare)

curryeater - because of the way the CB is withdrawn, we are between that 50-60k bracket. Every extra pound dh earns, 40p goes to the government in income tax, and with 4 children, 30p also is taken off the child benefit. When you factor in national insurance contributions as well, it means that for every extra pound dh earns, we are 28p better off.

With even more children you can end up paying the government more than you are earning.

It's marginal rates, but marginal rates of tax are what can highlight unfairnesses. What is the incentive for dh to work longer hours to boost his salary if 3/4 of it goes to the government? And certainly for people on 150k +, they argued that 50% was too high a rate to be an incentive, so I cannot see why for people on 50k, 72% is ok.

WE should have a thread whereby the squeezed middle class go and tell their stories, and then we should send it to the government and to the newspapers and ask the government to please announce immediately what they plan to do about it.

There is an e-petition on making all childcare completely tax deductible. I posted a link recently, I'll see if I can find it.

Make Childcare Costs 100% Tax Deductible

What people don't realise about the child benefit cut is that imo it is entirely ideological - it is part of the 'divide and rule' politics that makes them set the 'squeezed middle' against the 'deserving' and the 'undeserving' poor. All the rhetoric about strivers vs skivers, and the arguments that 'people on low incomes shouldn't be subsidising those on middle incomes to receive child benefit' is not putting a case for the cuts, it's turning groups against each other.

the child benefit is a brilliant example - they say 80% of people agree with it. But that's the 80% not affected by it. The same with the benefits cap - they ask a load of people if they agree with it, and people not affected say 'yes that sounds sensible'.

You can't just ask people who are not affected, because how will they know what the implications are. The child benefit cut is so that when the people affected by the benefits cap say 'hey, we are already poor' they can say 'yes, but look, we've hurt the middle as well'.

The cut to the top rate of tax is inexplicable. Their argument that 'the rich are paying MORE tax' is insane - because the reason they are paying more tax is because their earnings have risen more - the only salaries that are going up are the very top ones.

I fully appreciate that everyone needs to contribute, but I don't appreciate why it is families with children that have to bear the brunt of it. A re-jigging of the tax system would have been far more progressive, because it is intrinsically fair. Imo they should have left the personal allowance where it was (because raising it to 10k and then taking all the money back again through benefits cuts is just increasing admin). Then the HRT threshold should have been moved to 70k, which is more in line with where it should be - 42k is just crazy - BUT should have been put up to 42 or 43%, and THEN abolish the 50% rate of tax. You'd need to jiggle the figures to make them work, but that way the top incomes really would be contributing the most. I'd have even been happier to leave the HRT threshold where it was and stick a penny or two on it, rather than this divisive and unfair cut to child benefit, and the divisive language used to justify the benefit cap also.

I'm hoping that the gov is reading this. I'm going to give you my breakdown of income and general outgoings in the hope that the gov can see that the so called middle is so squeezed we can do no more and if you squeeze us more, there won't be any tax for you to claim anymore.

Income is £46k before tax. Looking at my pay slip,
Tax and NI combined is £860.
So that's more than £10k out already. Leaving us £35k.
Mortgage is £750. Gas and elec is £100. Council tax is £150. Of course there's water bills, tv license and others. So lets call that £1200/month x12= £14400. Leaving us £20k.
Childcare costs me roughly £800 but £243 is from my wage anyway so that costs another £10k. (For these purposes I've only multiplied £800x12. I know that £243 isn't taxed but I'm just adding it here for convenience as am on phone).
At one point I was paying two lots of childcare as older child has only started reception last September.

Leaving us with £10k. This is to cover food, nappies, insurances for car, house etc, petrol, mot, Christmas, birthdays, activities, clothes, etc. for two adults, 1 reception and 1 toddler.

My dh was made redundant. When he was working, his pay paid for the childcare. Thankfully because I had a job, he could setup on his own and thankfully despite this recession, he's doing pretty well. But because he's self employed, he couldn't claim any benefits of any sort. So we tend not to include his income and we are surviving on mine. His income is a bonus to us. But due to the nature of self employed and new, I can't really count on that regularly.

So. It's by no means rich. It's by no means rolling in it. Yes if I had no kids, I'll have £800 more a month! Or even more due to not having to buy nappies!

But the fact is we do. And we are providing for them as best we can. Some weeks my son gets school dinners and I then take packed lunch. This week we both are on packed lunch. To save £11/week of lunches for him and save £15/week for me.

We are eating out the store cupboards and only buying necessities like milk and bread. I'm making tuna pasta and corn beef hash (ala uni days!) to save money etc. I'm not attending panto and all that to save £100 for the family. I time going out times with the kids so we don't have to eat out. Or I bring lots of fruit and snacks to tide them over.

Not trying to be 'woe is me' because yes we are thankful we can pay mortgage etcetc but just to give the picture that the middle is by no means rolling in it. And yes I'm shopping at Aldi's esp since they've just opened a couple of months before Christmas!!

Right, Lily, I get it.

And your 12.05 post is spot on.

Strix - thank you! But I am just moaning, there are lots of people who need them far more than me, I would rather you gave them to a really desperate person or charity. I just need to get my itchy ebay fingers tippety-tapping (selling, and then buying, as soon as we get paid) and she'll be sorted for very little money. It's just, you know, how suddenly there is so much leg that wasn't there yesterday

Lily, don't forget that 50% tax payers also pay NI.

But your point about marginal tax rates is well made.

yes, I appreciate that. It was more about the argument really; the argument was that 50% was too high, but we as a non-wealthy family are paying 72%.

Yes, that is the issue and it was the same with those people on the margin who lose 100% of their single person allowance once they go over a certain level (cannot remember the level) which also means a marginal rate of 60 or 70%.

curryeater, that sounds hard and you are trying to do the right thing. Can we help? I remember the stage when we both worked full time and had 3 children under 5 and our childcare cost was 50% of each of our pay (or one of us was working for nothing whichever way you want to look at it). I felt that my career had progression and would have salary rises (which proved true) so it paid off inthe end but all that coming home to doing washing etc is very hard.

Eventually we could afford some help so we'd put the washer and dishwasher on and the cleaner would empty it a few times a week which helped but you need money for that.

I think there should be much more publicity of what net pay people have left over even on £60k salaries after they pay for mortgage, full time childcare, travel to work and tax/NI. I don't think people have any idea that a single mother on £50k pays £14k tax/NI, £14k mortgage, £14k childcare for one full time nursery place and is about in the same money left over bracket as a sdingle parent on benefits with all her rent paid. People just say - wow she earns £50k she must be rich.

Ultimately those stll working will win out because they are keeping careers going (loads of women on musmnet who give up work in all kinds of good jobs find in essence they hardly ever can work again at the same levek, career shot to pieces because they chose to have 5 years at home cleaning and doing childcare which they didn't much like anyway) and secondly when they keep working they may get promotion. The£100k mothers are not squeezed middle and it's easier for them and you tend not to get to £100k unless you keep working up and up. Also when children go to school those paying a lot of childcare won't have to so they have a bit more money then.

Xenia you keep giving this example of this poor single mum on £50,000pa but if she's paying a mortgage she would end up owning a house, which is a pretty large asset by anyone's standards - and one which a lone parent on benefits could only dream about.

Plus you have ignored the fact that she should also be in receipt of child maintenance, which depending on whether the father earned below £800pw (gross) would be 12% or £800-3000 per week 9% of his salary.

And aren't you always telling us that in your world childcare costs are joint? So £7,000 of her childcare costs would no doubt be paid for by the father...!

But what is the benefit of owning a house? We can't afford to move, because we live in a high house price area and would pay £££ in stamp duty (25k+). Then if we need care in old age it is sold and used to pay that bill. If you don't own a house, that is paid for by the state. So a house, although certainly an asset, is not always realisable in cash terms.

Xenia, you are making me well up. I thought you were going to say I should have trained for better paid work! (true)

I think media need to avertise net figures for the 40-60k year groups and highlight how much tax they do pay. That kind of salary more common in london .southeast where living costs and childcares higher.

People seem to this this group are rich when in reality they worse off than benefit claimants whos low income topped up or unemployed and all their money is net so 26k cap they literally get 26k combined benefits.

If i had housing benefit paying rent then i would have more disposable income

Takeway 2 we like twins as my rents £725 a year rising for tiny 1reception 3bed semi detached terrace on new build estate.
My coucil tax £153 power about 110 per month and water around 45, phone, internet and tv £60 and £15 house contents.

Food we try keep to 250-300 a month,

only middle child has nursery/preschool which is £160 a month.

School age child does rainbows , gym and cheerleading on average 100 a month. breckfast club opnly once a week £2 so can get child 2 to diffrent school in opposite direction.

School dinners we fused to just do 4days packed lunches and friday school dinners depending on how skint we are this week shes been all packed lunches and whinging about it this morning but school dinners have to be paid weekly lump sum and start of week.
would love to do school dinners all time but when all 3 at school will mean £120 month school dinners.

As for seeing pensioners free bus passes yet child cant get to school. How can we have free education without free transport lea rarly pay and school places not enough so some travel miles and pay more for it.

we live off cupboards shop aldis, lidls buy reduced and value foods and had some interesting creations. Hate week before payday.

on 46k you keep child benefit.

Xenia in part agree with you but

I reckon lost maybe 5grand-8grand off salary whilst taking break.
because wages not rising that fast and retail was crap money.it depends what person does before having a baby.
So if public sector frozen for 3years then they take 3year break providing can get old job back.

You made great sacrafices ie marriage, financial in earl;y days paying half salary to childcare , private schools for 5! But paid off as you have education, skill and sheer dogged determination and ambition not to let knockbacks and others bother you , you have your priciples and stick to them and you offer some good advice and valuable lessons however nopt every mum can earn 100k or even 50k. Most work thats fits in around kids is low paid min wage and unskilled and jobs so competative mums are bottom of pile of applications as they inflexible.

My husbands 40 yes hes made couple bad choices stayed in couple companies too long and on 41k hes take no career breaks but he shoul;d be higher up and earning more than he is, it bother him but find in past sometimes its right place right time, lucky break know some useless over promoted area managers in past who sell their garnny to get ahead.

Also family time is being eroded. whos keeping an eye on the teens? parents working opposite shifts just to get by hard on kids mine cry a lot they miss their daddy some days.

people think will get better when starts school but thats even more incovieniant and now childcare vouchers not availiable to over 5s and 2000 would last 2half months full time nursery.

How will parents afford and find good school age childcare without vouchers?

The ones getting tax credits an what ever else wont care about the middle and ones 100,000 plus wont care either. I guess we squeezed middle as theres so few of us to kick up a fuss we easy targets.

Child benefits never been enough to raise a family but it helps pay uniform, hobbies ect. shoes it was recognition that every child matters an every child treated equally.

If its good enough for oaps.
in 12years i worked fulltime I paid ni and tax. also student loan back.

I only had one lot stat maternity leave as left work before 1st child.

Eldest had pointless child trust and health in pregnancy grant was waste money even midwives admitted it.

I know people on low income who got 500quid maternity grant for each child they had . Now its restricted to 1st child but during labour years they had larger families as meant more money read earlier one woman got 500quid a week in cb a alone.

add in housing benefit. tax credits and child benefit and they dont count maintaince from absent father as income.

I agreed with tax credits scrapped for lower earners even though lost mine but dont agree with cb or getting rid childcare vouchers.

Also whilst im on rant mode discovered new loans for business start ups only 18-30 makes me at 32 too old.

I never planned to be a sahm mum just kind of happened.

we always wanted 3kids
all 3were planned
we could afford the kids without tax credits or any other benefits.
we would adapt if lost cb but would be kids that suffer really.
they would have to give up something or would need to make further cutbacks.

I know it sound terribly old fashioned but if could transfer my tax allowance to hubby whilst im not working I would as family be better off. would give him up to 18tax free then.

olg, many iof we single parents are not paid a penny by an ex and have no contribution to childcare from them. Don't think we live in clover with masses of child support. Many men sadly just disappear and don't pay a penny so my example is not that rare.

Also plenty of those single mothers take out interest only mortgages so will never be free of the debt so much the same as the single parent not working whose rent is paid by the state but yes I agree if it is a repayment mortgage of £14k a year after 25 - 30 y ears she might indeed then when she's about 55 be better off than the single parent in rented place who does not work.

I agree there should be more publication of people's pay at various levels after they pay typical housing costs for that area, childcare costs, travel to work and of course tax and national insurance. I don't think those in areas like Wales where very few people pay more tax than they get back from the system have any idea that the £50k single mothers or even families are no better off than a Welsh £20k worker with cheaper house prices. They think the Londoner on £50k has gold cars and expensive holidays.

Xenia you are the one who is always pointing out that childcare is a joint cost and that women should expect the fathers to pay half. Presumably your high-earning woman would too? That's why I mention it. Yes obviously a lot of women receive nothing from their children's fathers (doh) - I'm just saying you haven't accounted for the possibility that this woman would receive child maintenance - as most do.

If you want an interest only mortgage, you have to have 35-50% deposit, so you are talking about someone who has substantial equity to start with, plus a means of paying off the loan (such as a pension lump sum) if capital gains aren't enough. It's called "affordability criteria". However, like everyone else on an interest-only mortgage, your single parent is banking on the capital gains to pay off the loan plus a reasonable return on her investment.

You have acknowledged yourself that only the top 5% of all workers earn over £50,000. The average wage is half that, and the median is £18,500.

So only 5 in every 100 workers earn £50,000. How many of them will be women? Well women's earnings are still on average 20% below men's. I wouldn't put it higher than 1% of all workers earning over £50,000 being your mythical well-off female single parents.

However, if you can find me the figures which say otherwise I'll happily accept that I am wrong.

Olgaga, I'm paying an interest only mortgage and we only had a 15% deposit (and could have had much less)

Doctrine you say we only had a 15% deposit. I'm guessing you're not a single mum.

I invite you to read this. Things may have moved on since you got your mortgage agreement. You now need at least 35% equity. Many providers have now withdrawn IO mortgages completely. NatWest, Nationwide, RBS, Co-op, Santander have all withdrawn IO mortgages completely, along with other smaller building societies too - Newcastle, Coventry, Leek. Lloyds have now blocked IO mortgages for anyone who thinks they can pay off their loan through savings and ISAs. Virgin have substantially amended their criteria. You have to have a big wedge of LTV deposit, a guaranteed pension lump sum, a large amount of savings or investments or own other property/properties to get approval for IO.

Regardless of that - you are not a single mum earning £50,000pa with no maintenance coming in, and solely responsible for paying for childcare are you? So your experience doesn't actually compare with the example Xenia has plucked out of thin air.

The point I'm making is, there are vanishingly few people in the position Xenia describes.

And the point I would make to you is, I hope you have a clear repayment strategy - because you may well need it.

My daughter got an interest only mortgage with a lower % than 35% last month but arguing these details is not my point.

I just want those on low incomes to know that families or single mothers on £50,000 probably have exactly the same net disposable income as someone on £20k or state benefits. That is the really interesting bit about our welfare state. As benefits are a reasonable living there is not a huge difference between many people working very hard and those who do nothing.

The fact my £50k single mother may be a rarity does not change my figures or analysis. I have not plucked my figures out of thin air. there are single mothers on £50k getting no support from a father or single by choice who work full time and have a net income around benefits level. Yes they may well own a house when they are nearly old but that does not put extra food on their table now. I agree that if we make her a housewife and her husband works and earns £50k on my sums they save about £14k a year on childcare so they do have more - £22k after mortgage and tax. But we need to take travel to work, suits, work clothes off that for the husband. Say another £5k which leaves them with not a huge amount. So those thinking £50k wow those people are rich just need to get out their calculators.

My advice is women should pick careers much better paid than £50k. We need to return to the women who earn £1000 a day thread really and ensure daughters are fullly aware what they might earn and seize the day and have a great high paid career not go into beauty therapy or work down the local Tescos.

I'm not denying that things have changed, but they could have changed for Xenia's single mum as well (partner deserted after property was acquired, property acquired pre-2008 etc).

Anyway, I think the wider point about how costs as well as income need to be considered when looking at how various measures affect various people is sound.

I think the wider point about how costs as well as income need to be considered when looking at how various measures affect various people is sound.

However, this is a vastly more pressing problem for poor families than it is for anyone earning £50,000 pa - single parent or not.

The Government?s claim that work will pay for the UK?s most disadvantaged families under Universal Credit is simply wrong. (Barnardo's)

The single mum who's a high earner is also hopefully likely to have her head screwed on about picking a father for her child who isn't a knob and pays maintence voluntarily or if not how to go about extracting it.
You'd hope do at least.

I am "middle income" working mum. Receive no maintenance or help with childcare costs from the father of my child. Pay £1100 childcare per month from my own net salary. My partner does not contribute as father of child does not and also I earn a lot more than my partner so don't feel he should.

However we are flat broke like many on similar incomes who pay out a huge % in tax and childcare. I can't afford a tube travel card and we eat basic meals and spend all our evenings and weekends doing housework as can't afford help. we both work long hours but is only way we can see to perhaps have a chance of getting a better standard of living in the future - but if we have a baby this is unlikely to happen

Also sometimes you don't "pick" the father of your child eg when you are an impressionable 18 year old! What a silly thing to say. Also circs around fathers not paying maintenance cane be complex.

Also I really feel for single mothers who are dependent on ex for maintenance and help with childcare costs as men often use this as power over the mother. Sad but true. Would hate to be in that situation rather be poor and independent.