Childcare and the tax system - fascinating thread title! - but I'm genuinely interested

[SardineQueen]

I've recently become self employed and have found that I can deduct pretty much anything to do with my work from my tax bill, bar childcare costs. Given that childcare is pretty much a fundamental to working, if you have children, easily as much so as petrol or car insurance or a printer cartridge or whatever it might be, why is it not allowed as a business cost? (Sorry if have the jargon wrong).

This is also linked to what I thought at the time of the MP expense scandals. They were claiming legitimately for all sorts of things - cars houses duck houses decorating you name it. There was a female MP though who got told off for claiming for her nanny. Claiming for her cleaner, or gardener would have been fine. But not the nanny, and no-one in the papers seemed to question this rule. Surely in terms of enabling a woman to work (or enabling both parents to work if we want to put it properly!!!), a nanny or other childcare is absolutely essential. But it's not allowed.

Does anyone know WHY?

My guess is tradition, systems being set up to serve men, and possibly expense.

Has anyone ever questioned these rules, and if so does anyone know what the official response is? Because when you look at it without the filter of current practice on, it is totally illogical. It makes no sense.

[kickassangel]

also - the help with childcare was cut by the tories at the same as tax relief on mortgages, and the married couples tax exemption.

so, if you were married with a family & a house, then you suddenly lost 3 lots of help within a year or so (just going on memory, so willing to be proved wrong), making it far harder to start/sustain a young family. it shouldn't have affected women more than men, but guess what?

[karmakameleon]

Interesting, everyone remembers the mortgage interest tax relief and the married couples allowance, but I've never heard of the childcare one before. Does anyone know what it was called so I can get more info?

I'm not surprised that WTC are underclaimed. I tried to look it up in response to SQ's question about the WTC thresholds and I was bamboozled by all the tables and different options. It must be a huge burden to understand what you are entitled to.

[WorkingItOutAsIGo]

Tootooposh well, I think I am right because I am actually old enough to remember it - it was a long time ago - and in fact what I really remember is how annoyed I was by it. I am happy to accept my memory might be wrong but I do think I remember it. Interesting your notes from France on outcomes.

And no, Himalaya it was much earlier than the free nursery places - by then I had children but when the childcare one went I didnt.

Obviously all taxation decisions are choices and the need is to balance fairness with creating the right incentives, and I am no expert in this at all, but simply since I couldnt work without childcare, it seems to me to be an essential personal (not business) expense of being able to work. It has obviously been a nice luxury over the last few years to benefit from some taxation savings with childcare vouchers, but nonetheless I write a cheque to the taxman every quarter out of already taxed income for nearly £3000 for my nanny's tax and national insurance, and of course her salary also comes out of my already taxed income. So given my nanny costs me something like £40,000 in total, that's actually £80,000 of my gross income accounted for before I step out of the door to go to the office to earn it.

I love my job, and am privileged enough to be well-paid and so working makes financial sense, but I am paying dearly for the ability to work and I think that is unfair as I couldnt do it without this expense.

[Himalaya]

Tootooposh -- I'm not against a universal benefit that goes to all parents, including Dennis Thatcher etc... But I do think one that gives the higher paid more is not good use of funds. Giving parents a tax free allowance for each child, as long as you didn't raise the boundary for higher rate taxes would benefit everyone by the same amount (or at least everyone earning above the new limit, which of course isn't everyone at all ..) . But expensable childcare is a blank check for boarding school fees, the most expensive nannies etc... I don't think you can solve this by ruling out boarding fees - for some parents with jobs that involve a lot of travel that can be the best childcare. The point is there is a lot of deadweight cost if everyone who already sends their kids to boarding school now get 40% of the boarding fees paid by the taxpayer, as does everyone who can comfortably afford their nanny already, plus all the self employed people who will just employ their SAHP OHs as a childcare business expense and take a tax payout.

I think Child Benefit was originally conceived as an additional tax free allowance for families with children. But then they decided to do effectively the same thing but give the money directly to the main childcarer rather than hide it in the main earners pay.

Karma - if you think the WTC forms are hard, you should try doing a self employment tax return...if you want simple and fair I would give higher child benefit. Then parents can decide to use it to help pay for childcare or help pay for time off.

I do agree that it is hugely important that women don't automatically give up their careers when they have children. but unless expectations are changed that childcare/ organising childcare/paying for childcare/ doing the pickups, dropoffs and sick days is an equal responsibility I think subsidised childcare aimed at getting women into work will just get them into the mummy-track ghetto of flexible low paid jobs.

[karmakameleon]

Himalaya, I've done tax returns and know what a pain it is, but to add a box for childcare probably wouldn't cause most self employed people too much trouble. Much less trouble that trying to claim WTC.

For employed people, the childcare voucher scheme is essentially a way of giving employees tax deducable childcare with a cap. Although it's being phased out for cost reasons, I think it was an efficient scheme that a lot of people used. The one down side was that not all employers provided it but you could easily ensure they did with legislation.

Increasing child benefit would be a great idea too, but I doubt very much that any government would have the appetite to increase it to levels that would pay for full time childcare for those that want it.