Imogen Hart and her partner’s combined income is around £150,000, but they still feel unable to save.
Their mortgage and service charge on their two-bedroom London flat total £3,100 each month, and they pay £250 per month in council tax.
The 41-year-old, who works in public relations, has a three-year-old son. She says her family’s monthly bills total over £6,000.
A large part of that is childcare costs. These can cost as much as £2,100 per month for the couple. The reason behind the high cost is her partner’s earnings.
Since September last year, working parents in England have been entitled to 30 hours of free childcare for children aged between nine months and four years old.
However, they don’t qualify if one parent earns over £100,000 per year, regardless of the other’s income.
Imogen’s partner was earning £110,000 a year, and although he has now moved to a job with a lower salary, over the course of the year, his earnings still exceed the £100,000 threshold, and so they are not getting the benefit many other families do.
“It feels unfair as the set amount that doesn’t take into account London mortgage prices, council tax costs and London nursery fees,” she says.
The Conservative Party agrees. Kemi Badenoch has said the Tories would scrap the “cliff edge” that means parents in England lose out on childcare support when they earn more than £100,000 a year, if the party wins the next election.
“What we want to see is that people who work harder don’t get punished for doing so,” Badenoch said.
Imogen doesn’t think the threshold needs to be abolished entirely, but wants politicians to look at alternative ways to operate the system.
“I think it has to look at household income, not a singular wage, and it needs to consider London living costs,” she says.
“I think it should still be means-tested, but with a bit more thinking that the current £100,000 single-earning cut off,” she adds.
The number of children missing out on government-funded care because a parent earns more than £100,000 has more than quadrupled since 2018, according to government figures.
Estimates from the Department for Education suggest some 50,500 to 99,000 children were affected last year.
Lynn Carratt,45, and her husband are another couple stung by the trap.
Lynn Carratt, a journalist and publicist, says she has always found the single-earner rule ‘frustrating’Her daughter started primary school last month, but before this, she was paying around £1,700 a month for nursery fees, as her husband earned £118,000 a year, making them ineligible for the childcare support.
“This was a huge amount of money to find every month, right until last month,” says Lynn.
“The crazy thing is that my daughter finished nursery in September and has now started private school and her private school fees are around £300 a month cheaper than what I was paying for nursery. That really puts the cost of childcare into perspective,” she adds.
Lynn, a journalist and publicist, says she has always found the single-earner rule “frustrating”.
She explains: “I absolutely understand the principle that people who earn more should contribute more, but I don’t think the £100,000 cliff edge was a particularly fair way of doing it because it looked at individual earnings rather than the overall household income.
“You could have a couple earning £60,000 each, so £120,000 between them, who could qualify for the working-parent childcare entitlement, while a family where one parent earned just over £100,000 and the other earned considerably less could lose it.
“I do think the system needs reforming. I’m not saying higher earners shouldn’t pay more towards childcare, because that’s understandable, but I think there needs to be a fairer and more gradual system rather than reaching one figure and suddenly losing a valuable benefit.”
The £100,000 threshold has not been increased since it was introduced in 2017, despite rising costs since then.
The £100,000 salary is also a key point at which earners lose other tax perks.
For every £2 you earn above the £100,000 limit, you lose £1 of the £12,570 personal allowance – the portion of your earnings that are tax-free.
The threshold is sometimes called the 60 per cent tax trap, because people caught in it effectively pay a 60 per cent rate of tax on earnings between £100,000 and £125,140.
Both thresholds apply to adjusted net income – income before tax but after pension payments and charitable Gift Aid donations are made – meaning many cut their salary below the threshold by increasing their pension contributions.
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