Comment by blibble
9 days ago
> There is no income stage where earning more money has you taking home less.
there are several
there's one at around 50k (where child benefit is removed) and another at 100k (where childcare vouchers are removed)
9 days ago
> There is no income stage where earning more money has you taking home less.
there are several
there's one at around 50k (where child benefit is removed) and another at 100k (where childcare vouchers are removed)
Yes exactly at 100k you lose free childcare. It’s not a taper you lose the whole thing.
Here’s an explanation of the figures:
https://www.thetimes.com/business-money/money/article/high-i...
Also at £100k you start to lose your tax-free personal allowance. The commitment of successive governments to avoid raising taxes on "ordinary working people" has created a bizarrely inconsistent tax regime for above-average earners, where people earning £65k could end up paying a much higher marginal rate than people earning £165k.
https://taxpolicy.org.uk/2024/10/17/reform-income-tax-end-th...
Yes, once you go from 99,999 to 100,000 you lose 2000 per pre-school aged child you have and have to file your own tax returns for the privilege despite being PAYE.
The latter is no longer true
How many preschool age children do you have?
Annoying that those are, it’s probably more accurate to say you don’t qualify for benefits when you earn considerably more than the median wage (£38k).
Also, if you’re paying a decent amount in to your pension your effective salary is lowered and won’t hit that child benefit threshold until your salary exceeds £60k or more, and you still get to keep all of that money.
Tax free childcare is already extremely lacking in my opinion, if you want professionals to work, it shouldn't be extortionate to have your children in nursery, and costing you 2000 per child per year for one parent earning 100,000 when two parents can earn 99,999 each is also ridiculous.
The real kicker is the 99,999->100,000 trap where you lose all tax free childcare care allowance, £2000 per year per child, it's assessed quarterly, and if you exceed it by a single penny, not only do you lose it, they also demand immediate repayment of all childcare allowance so far that year.
>>they also demand immediate repayment of all childcare allowance so far that year.
So this might or might not be in line with official guidance but I was exactly in this situation and I expected to earn around £99k last tax year then I was given an unexpected £4k bonus in my march salary, and I wasn't told about it until it was in my account already so it was too late to put it into pension. I asked HMRC about it and they said as long as I was being truthful at every quarterly questionnaire where they ask if you expect to make over £100k and I told them the situation changed as soon as I became aware of it I don't have to pay anything back for the free childcare hours. I asked my accountant and she said since I have it in writing it should be fine(but HMRC can always change their mind so who the hell knows).
Compare that to the insane situation of the benefit for carers where people are being asked to repay benefits going back years if they went over the threshold by a single pound - I imagine HMRC is being incentivieed to go after benefit takers more than other areas like childcare hours, for various more or less political reasons.
2 replies →
It's a classic result of step functions, which are popular in tax codes and regulations.
For example, if you pollute 99 ppm, then you're good. If you pollute 100 ppm, you're bad.
I once half seriously proposed a limit on the second derivative of effective rates like this but imagine explaining that to a politician these days...