Tax relief on childcare

[ND]

A recent article on mumsnet looked at the ever increasing costs of childcare and suggested that if there was tax relief on this it would help all families with mothers who worked outside the home.

This seems very sensible as I claim just about everything else against tax (I am self employed) but not the most important and most expensive. Id have actually written to my MP ( a first) which was very easy using "faxyourmp.com" and received an initial response within 2 days. What do other people think?

As a paid nanny I was horrified at the amount that my empoyer had to pay to produce my net of £350 ( gross £500) a week, then think about how much she has to earn to pay thatamount!

I tried to get her employer interested in paying me directly, on their pay roll as they had several mums in the same situation, but they were going to have to take some convincing, they thought it too risky, they know they need to do something, but 5 years later they are stil thinking about it!

I ended up being self employed as I worked for three families and it got too complicated, I am now responsible for my own tax and NI as I am also a director of a company from which I draw a salary and dividends from another.

I think that there should be help for everyone, not just those whose companise are prepared to give vouvhers otr pay nurseries, afterall, if WFTC can be paid to childminders for childcare, why not to nannies

A subject dear to my heart, ND - I will rant about this to anyone who will listen (and others who glaze over too!!) - it is absolutely wicked that on top of paying one's own tax (often at the higher rate) one then has to pay a nanny's tax. This puts the cost of nannies out of reach to all sorts of people who would otherwise be happy to employ a nanny, and who would thereby be creating extra employment etc etc etc. I worked out the other day that £40k of my gross salary goes solely to paying my nanny - I am very fortunate of course to have a well paid job and to be able to afford this, but of course it's completely out of reach to all but the very well paid. I view my nanny as an essential cost of enabling me to do my job, and therefore of course it ought to be tax deductible. (Unlike you ND I am employed not self-employed.) I suppose the argument against is that there are plenty of other people out there willing to do my job if I didn't do it, so there's no real incentive for the govt to do anything...

If you want to put your case forward on this one you need to put your finger on a tangiable reason and argue it through.

Resenting money going to the taxman won't really cut the ice if you trying to petition the govt. You need to think of someway to make it worth their while, not just your current situation. 5 years ago would you have been happy to subsidise such things, will you feel like this in another ten years? If you don't pay the nanny's tax, who should do so?

(I used to work in public affairs and, a long time ago, I trained as an economist.)

See if you can come up with some ideas to support your point of view. Can you think of a way to encourage people to want to become a nanny?

Goodluck.

Can I just add that in my knowledge in 3 European countries you can deduct your childcare costs from your taxes........
My friends and relatives in those countries usually don't believe me when I tell them how much I pay in nursery fees and my kids only go 3 days a week (they usually think I've done my conversion wrong!)... and then they say but SURELY you can deduct this... sometimes they think I haven't researched this properly.....

Much as I might agree with the basic argument, I don't think the example of paying 40k of your gross salary to your nanny is going to create much sympathy. I'm not sure, but I seem to remember that only about 9% of the earning population earn enough to pay 40% tax. I agree with MalmoMum - you need a reasoned argument not just a resentful-sounding whinge.

I wouldn't argue that the nanny's tax shouldn't have to be paid - the same tax treatment should apply to nannies as to every other employee. What I object to is paying the tax twice, first on my income then on the nanny's. It's anomalous that a number of costs which are essential to enable someone to carry out a job are tax deductible (i.e. can effectively get paid out of gross income rather than net), whereas this major one is not. If men bore the brunt of childcare it would be tax deductible.

The reason I feel quite so strongly about it is that I believe the situation is rationally wrong (and unfairly penalises women), rather than it just being a resentful whinge - although I fully accept that the very basis of the whole argument is going to provoke resentment rather than sympathy. Which is part of the problem really - if the govt change it, it would be seen as just giving free money to the rich. I don't hold out any hope of the situation changing.

Think I'll change my nickname now.

Actually I think that fact that it takes £40k of your gross salary to pay for a nanny is a very good argument in favour of tax relief. Many many jobs entail hours or travel etc that rule out less flexible forms of childcare such as nurseries and childcare. Why should only higher paid and usually older women with children have access to such jobs?. The figure of £40k demonstrates just how far out of reach childcare is for most women.

For a number of people, a Nanny is a necessity for them to be able to work so I don't understand why it isn't deductible as are so many other necessary costs (like a chaffeur!!). As far as the taxpayer is concerned, I am convinced that tax relief on childcare would actually lead to greater income for the tax man. It would mean a substantial rise in the number of women able to financially justify working wich combined with the increase in job opportunities for women as carers/nannies (perhaps the single mothers that the government is so keen on getting into work) that surely the net effect would be positive. This is especially the case given how many employers pay in cash in order to avoid the double tax hit.

I am totally in agreement here. If someone hires a secretary they can claim tax releif from their earnings to pay for the secratry's wages. With a nanny you are effectively paying tax twice. Once on your own earnings and then again the tax for the nanny. It is nothing to do with whinging about the amount you need to earn to pay the nanny, it is more about fairness. Some people can claim tax relief on the silliest things, including dry cleaning! But a nanny's wages - NO

I don't earning £40K but I do have a nanny, and she is paid about £13K gross a year, I would love that £13K to be set against my tax for the year, it would mean I would only pay tax on anything I earnt abover £13K + £5K (ish of personal allowence). This is what should happen, and doesn't.

The system is so confusing and is set to get worse, I earn just above the limit for Working Family Tax Credit, but I do get Childrens Tax Credit. I have a little insider knowledge that things are set to change again and the WFTC plus the CTC are going to be combined in some way.

All I wish was that we could all offset our childcare costs against tax and then we could do away with a lot of the WFTC and CTC. It isn't just about helping the rich, it helps mothers who work.

Anyway I would love to lobby on this one, and infact I do speak to the government about these issue, but it wont change. The average 'man on the street' wouldn't stand for it when not enough money is going to public services.

Perhaps Gordon Brown will see sense as he has promised more help for all families, so who kknows!

If nanny tax relief was a reality I think it should also be claimable by couples where only one person is working. Are childminder/nursery fees tax deductible?

Suedonim they are not tax deductible but with nurseries, there is a scheme by which employers can pay the nursery direct out of gross income. This is a bit complicated however and means the employer has to have a relationship with the nursery. Nannies are almost always paid net with the tax and NI liability met directly by the employer - naturally this doesn't arise with other forms of childcare as there is no tax liability. In my view, all childcare should be tax deductible - perhaps not at a rate of 40% but say, 20%.

There was a pice in the Sunday Times yesterday about 'rent-a-wife' where busy working women can rent a wife to organise their lives, open their post, pick up dry cleaning etc. The parting shot was along the lines that this is a tax deductible expense! I think childcare should be brought into line with all the other expenses which you can claim if you are working. If childcare is taxed, lets try taxing chauffeurs, personal secretaries & 'rent-a-wives' and see whether there are a few more complaints to the government!
BTW lets compaign to remove VAT on tampons etc. at the same time!

I read that berries and couldn't believe it. Having someone re-arrange your sock drawer at £30 an hour is tax deductible while childcare isn't!!.

Over to Bells and other nanny users to start arguing with the IR that their employee is indeed a "rent-a-wife" then. How completely ridiculous. Could it be connected with the fact that it is generally the woman who arranges the childcare but a man would be more likely to commission a" rent-a-wife"?
Quite right berries - the reduction in VAT on sanpro a couple of years seems to have mysteriously had a minimal impact on the shelf prices of these items.

The real problem is that we don't pay enough tax in this country in general, and therefore don't have the infrastucture or funds in place to support subsidised childcare. Across Europe, the average amount that people are expected to contribute towards childcare costs is 20-30 per cent, while in the UK it's more like 90 per cent. Unsurprisingly, we in the UK languish almost at the bottom of the league for European taxation, and you can't really expect decent State provided services without paying for them in some way (just look at the sorry condition most of our public services are now in because of sustained under funding over a number of years). But people in the UK just won't accept higher income tax - it's a vote loser - and govs know this.
Basically, you can't have everything - good healthcare, good transport, good education and subsidised childcare without increasing taxation ,and that's not something that's likely to happen here in a hurry. If you want these things, then you have to go and live elsewhere in Europe and pay higher tax - but inevitably have a better standard of living.
That said, it does annoy me the pretence the gov makes of encouraging women back to work, without providing any incentive for them to do so. With the set up as it is, I can highly recommend the scheme mentioned by bells2, whereby nursery fees are paid straight out of gross income. I work 4 days a week, so both my children go to nursery (although I've also suffered nanny tax in the past), and being part of this scheme shaves about £700 a month off our fees bill. Well worth it, I'd say, and it makes it worth my while working for a living.

Quite, that is the way it goes Grizzler.

Agreed Grizzler but tax deductibility for childcare would likely mean an increase in revenue for the economy given the large numbers of women who would be able to financially justify workin and the jobs it would create. It wouldn't be a subsidy any more than offsetting your chauffeur against tax is a subsidy now.