This week, applications forthe government’s scheme offering 15 hours ‘free’ (aka funded) childcare for two-year-olds opened, after it was announced in spring last year. But many families who are cut out of the funding because one person in their household earns more than £100,000 have told us they’re ‘furious’, ‘frustrated’ and out of pocket by thousands – with many telling us the cap by government is holding women back in their careers.
As with child benefit, tax-free childcare and the current model of whether you’re entitled to 15 or 30 ‘free’ (funded) hours, the roll-out of the new scheme has upset those who are cut out of the funding because of the income of one parent – as opposed to the whole household.
The criteria means that if one person in the household is earning over £100,000 adjusted net income, the family is not eligible for the new funding for 15 hours funded childcare for two-year-olds, no matter what the other parent earns. However – those who are upset with the decision say – if a child lives in a household where two parents earn £99,999, and there’s a combined income of £199,998, the child could still get funding.
While many acknowledge it may sound like ‘first world problems’, the majority of parents who contacted us said that it’s the mother who is usually the lower-earner and without any childcare subsidy, is then priced out of work and her career suffers.
Other families told us that with the increased cost of living, especially in London, they’re struggling to make ends meet and that even a penny over the threshold by one parent can cost the family more than £13,000. Especially if they’re tipped over the threshold by an unexpected bonus or having to do overtime as was the case with one NHS worker. One parent told us they worked out that for a parent, if you earn over £99,000, it only becomes ‘worthwhile’ (in the sense you’re not worse off because of lost childcare benefits and taxation) over £130,000. Below that, parents told us they’re taking demotions and pay cuts to stay within the brackets for funding if there is a lower earner in the household, in order to stay afloat.
We asked The Juggle audience whether they were in the situation of losing out on childcare hours because one partner earns £100,000. A few followers did message to say there are ‘bigger fish to fry’ and that ‘if one of us earned over £100k, we wouldn’t need government support!’. Another noted that just 4% of the UK earn over £100k – and the average income is £38k, so not only does the cap affect few people, it was also an even small percentage who had two in the same household and were ‘getting away’ with having two earners just under £100k. Analysis of 2020-21 Survey of Personal Incomes dataperformed for the announcement of the childcare expansion in Spring Budget 2023 also shows that 98% parents of children aged two to four-years-old earned below the upper threshold.
However, the response we had from the audience wanting to tell us this way of capping personal rather than household income was affecting them negatively was overwhelming. More than 150 of you contacting us in just a few hours wanting to have your say. Perhaps it says a lot about the high cost of childcare that it's a benefit that families told us they're willing to try and make salary sacrifices for.
It’s also important to note – as many did – that the issue also affects parents in terms of child benefit in the same way, where the cap is lower (£50k) and still stopped if just one parent earns that salary, while household income is irrelevant.
'It makes me furious that it’s suggesting that my husband earns enough that I don't need to work'
Many of those who contacted us were women who’d been pushed out of work by their partner earning just above the cap, meaning there was no childcare funded hours.
‘It actually makes more financial sense for me to stop working and has meant a pause on trying for another baby,’ one mother told us. ‘Of course we are fortunate that one family member is on a high amount but that gets quickly swallowed with a large mortgage and nursery fees. This is a big reason why there are fewer female leaders in the arts [where I work] and just contributes to the gender pay gap.
‘It makes me feel very overlooked and belittles what I can offer in terms of work.’
Many women told us a similar scenario to one mum who said: ‘I’ve now made the sad and difficult decision to leave work – as the reality is with no funded support whatsoever, I’d be working just to pay our nursery fees.’ Another added: ‘It makes me feel undervalued simply because my husband is a high-earner my contribution is not valued. If the policy really was to support parents back to work it would apply regardless of income as the government would benefit from additional income tax anyway.’
Many have taken reduced hours to make the maths work, like one woman who said: ‘I lie to my friends that we get the free hours as I don’t want them to know my husband earns more than the threshold.’
Another said they were resorting to putting childcare on their credit card, despite her partner earning more than £100k. ‘It’s really upsetting,’ she said. ‘I was really counting on being able to receive additional support once my daughter turns two, so it is incredibly frustrating to learn that once again we’re being excluded despite the fact that childcare costs have led to us having debts.’
‘I am a nurse going back to work two days a week after mat leave. Although my husband has a good job (he's a solicitor) we are not rolling in money by any stretch of the imagination’ one parent told us. ‘That we don't qualify for any help is tough seeing as my job is so low paid. I've had to go down to two days because it doesn't make sense for me to do more. Hopefully I can pick up extra weekends or nights to help us as and when I can.’
Another added: ‘It makes me furious that it’s suggesting that my husband earns enough that I don’t need to work… irrespective of that fact that I’ve worked hard for my career, may want to work, am contributing taxes and building my pension.’
‘My husband earns more than £100K and so we don’t get it. It’s a hard pill to swallow that you work hard and build a career but now I’m the one that can’t continue! Those that earn the same amount as us, but with an even split are already paying less tax and then on top of that get 30 hours free childcare! It should be done on household income - if the system felt fair, I wouldn't be upset that we didn't qualify but right now knowing there are families that earn more than us, that do qualify just feels so wrong… I worry about the impact a career break will have long term on my career.’
Another parent said: ‘We’ve had to get into significant debt because we can’t afford to pay for anything at the moment it’s all going on bills, commuting or childcare. We’ve considered me giving up work as we’d only be slightly worse off but I don’t want to be left in a worse position in my career. £100k is such an old fashioned figure, it’s not unusual for at least one parent in households to earn that near London and it feels like I can’t talk to anyone about it as people assume it means you’re wealthy and don’t deserve help. It’s even more irritating it’s being advertised as help for all working parents.’
'We’re considering asking his company to not give him any more bonuses'
Some parents told us that the uncertainty of their wage structure made it difficult.
‘We had a situation where my husband gets quarterly bonuses and our tax free childcare was stopped part way through the year because they said he MAY go over £100k cap. We had to provide projections for the rest of the year (which is impossible with a sales bonus as it changes so much quarter to quarter) they said if he went £0.01 over the £100k cap we would have to pay the whole year’s worth of childcare back to them… the system is broken.’
‘We’re considering asking his company to not to give him any more bonuses, unless they are of a substantial amount,’ we were told.
One parent said her partner asked to be paid £99,000 when offered £105,000 because of the scenario: ‘I’m on nowhere near as much money as him and with childcare costs it’s almost negligible for me to work at all. Without the funding, it wouldn’t work so we’re taking a hit on his salary so that I can continue my career.’
The £100k mark is only for adjusted income, so things such as pensions don’t count – therefore many who are savvy choose to move money into pension contributions or similar until their children hit school, so they can still qualify for the benefit.
But for some, that’s not an option. As one mother told us: ‘It’s hideously unfair. And should be done on total household income. Friend of ours have both reduced their hours so they came just below the threshold AND get the funding. My husband is a consultant paediatrician and his salary is less than 100k BUT they all had to work extra in the pandemic and often to help their teams and now to cover junior doctor strikes - that will take him over the threshold come April and so we can’t claim the funding. It’s not right or fair.’
Some said role banding meant salaries were set or pension schemes didn’t allow for bigger contributions. And one mother told us: ‘I’d have loved for my husband to put in a pension so we were able to get the maximum benefits from it but as it’s his bonus (and his money) the decision lies with him - it’s been a source of many arguments as generally it’s me that ends up suffering. It’s frustrating!’
‘My husband is 1k over the limit now due to a “cost of living” increase and because his pension is a salary sacrifice scheme rather than an employer pension, it means his gross income is too high and he can’t over invest in his pension to get around it as all the blogs and forums suggest. So his 3k salary increase means we are now over 12k per annum worse off,’ said one parent.
'The parents of multiples have it tough right now'
Many of the audience who are single parents also explained how it adversely affected them. ‘It bothers me for single parents,’ one parent told us. ‘A dual income family can earn £99k each and a single parent earn £100! I’m talking solo parent, no other financial contributor.’
And lots also contacted us about having multiples and how that’s not reflected by the funding structure.
‘My husband earns more than this so we don’t qualify but we have 18-month-old triplets so nursery fees times three would be very expensive. I’m gutted as I thought I’d be able to work part time after they turn two, said one parent.
Another added: ‘We have a 3.5 year old and twins that are turning two next week. I earn £100k+ and are still totally squeezed because of mortgage andnursery for one child. My wife can’t go back to work because there’s no childcare discounts for twins and no help for us from the government until the twins turn three. The parents of multiples have it tough right now.’
'Childcare was one of the biggest drivers to moving to Australia'
For some though, it was primarily the fact that one family’s household income could be almost double £100k, and they’d still be eligible to apply for the hours. So much so, that one family said it drove them abroad.
‘I was very frustrated by this. It meant that with two children, it made it harder for me to justify working as the costs became too high due to my partners salary being over £100k,’ they said. ‘I want to have a career and continue work. We decided to move overseas where the situation is much more favourable to our situation, and childcare was one of my biggest drivers to do so. We are now living overseas in Australia where it is all done on dual family income. I feel that it's just a lazy policy from the UK and makes zero sense. They just didn't want to attempt to assess family income.
Others worried that on top of the lack of funding, the squeeze put on nurseries meant their hours would cost them more too.
‘I have worked so hard (five years of uni and then three years of professional qualifications) and am fortunate to earn over £100k while my partner earns almost half. I am not only essentially taxed at 60% due to the loss of the personal allowance from £100k, I get no return on this additional tax to help childcare and pay approx £1900 per month for nursery fees. While we are comfortable financially it seems so unfair that we miss out due to my earnings, when families with combined higher earnings pay less tax and benefit from these free hours and tax free childcare. The system is broken.’
‘We worked out that I need to earn £130k to be in the same position as earning £99k and qualifying for the free 30 hours childcare and £2000 tax free childcare,’ said another parent.’
‘You feel you can’t complain because you’re in a privileged position… but it’s the inequity,’ admitted one parent. ‘There are households with identical, or greater, household incomes than ours, but because our household income is split between £120k and £45k, we don’t qualify. It becomes even more ridiculous when you consider high earning single parent households who may need more childcare because they don’t have a partner or family nearby to share the load with, and once they hit the £100k mark, it’s lost. The cap disincentivises people from pushing into higher income brackets.
‘My sister in law recently dropped out of work to do a full time masters to progress her career. But as she’s not earning anymore, she’s lost her 30 hours. The whole system is a nonsense.’
Others said that especially in London, that salary isn’t unusual – or excessive: ‘The cap is unfair and unrealistic here,’ one said.
Another added: ‘In London this is barely manageable. The fact that another household earning almost £200k gets the full childcare benefit, yet we get nothing just adds massive insult to the struggle of already being a full time working mum. This has added so much stress to our lives, yet the sums don’t add up.’
What do the Department for Education say?
The Department for Education say that with families of two parents, both must be working to access the new offer, which is why the eligibility criteria must be applied on a per parent basis.
A spoksperson told us: 'We are rolling out the single largest expansion in childcare in England ever, and it is important that support for working parents is targeted to those who need it to help them balance the demands of work and raising children.
'The overwhelming majority of parents earn less than £100,000, and there is a separate, universal offer of 15 free hours available for all parents of 3- and 4-year-olds.'