What is the definition of a high income in the UK? – What do you think?

The level of earnings at which you define ‘high income’ is a subjective one. Many of the childcare schemes offered in the UK are unavailable to those with incomes higher than certain levels (based on personal incomes for each parent, rather than as a family).  

Where do you think it is? 

• £28k (the median UK income at the end of 2018)
• £46k (where roughly the higher income tax threshold was until 2019 – it’s now £50k)
• £60k (the point at which the high-income-child-benefit-charge takes back all your child benefit money – see later)
• £100k (six figures, the upper limit for a lot of UK financial / benefit schemes)

I’ve thought about this a lot and done some research. Back in 2010 when the Coalition government came to power, there were a lot of headlines regarding cuts and austerity. Childcare following changes made in those years became even more expensive. I remember seeing interviews with men and women who were teachers and nurses who couldn’t afford to both work and pay for childcare.

Whatever your politics, paying for someone to look after children can be difficult for many!

I’ve decided to go for £50k per year as a ‘high income’ because this is both the current higher rate of income tax threshold and also the limit up to which you can claim the full amount of child benefit. 

Of course you could also say £49k is a pretty healthy income too and a range below it too. 

Why is Childcare so complicated?

The system in the UK for getting help with childcare costs is extremely complicated.

You need to be on the ball in order to ensure you’re claiming all the help you’re entitled to. 

Getting these things wrong can lose you so much money over time, money that can be spent on creating experiences and memories that will enrich childhood for your sons and daughters. 

This isn’t about dodging tax or finding loopholes, but about maximizing the help that you are entitled to. 

There are many childcare schemes, each with their own qualifying criteria, disqualifying criteria, caveats, terms and conditions.

It gets worse when you’re trying to work out whether receiving one type of childcare help will alter your entitlement to the others. 

Many of the schemes work on assessing an individual’s income rather than that of the whole family.

This post will try and simplify each scheme and show you what you might be entitled to. 

A simple list of all the childcare help available – read below for which schemes will provide childcare for higher earners in your area

If you qualify for these schemes, how you receive them may differ. Some are benefits (eg child benefit) paid into your bank account.

Other schemes give you an online account through which you can add money and your account will get ‘topped up’ with the money you’re eligible for.

You can also pay your childcare provider through some of these portals. 

I recommend you use the following section in conjunction with our UK country-specific articles on How to Afford Childcare.

Below we will explain how the schemes differ for higher earners.

Open two tabs in your browser. One for this post and one for the article relating to your country of residence below. Reading both posts together will help you see where you stand.

Childcare for higher earners in England

15 Hours Free Childcare for 2 year olds

If you’re a higher earner you’re unlikely to qualify for this scheme because you need to be receiving a qualifying benefit. 

You may be able to qualify however if your child has a disability or has special educational needs (SEN).

15 Hours Free Childcare for 3-4 year olds

Tax Free Childcare

You should be able to qualify for this if both parents in the household (or the one single parent) are in work and earning less than £100k. 

Tax-free childcare is said to be tax-free because the government will top up parents’ childcare payments with the 20% basic rate tax they’ve already paid on it when it came out of their payslip. This is only really ‘tax-free’ if you don’t pay any higher rate or additional rate tax though. 

Tax-free childcare is available to parents in households where neither parent earns a taxable income above £100k. It is also only available for children under 12 which is pretty restrictive. If you manage to fall within the eligibility criteria then you can save up to £2000 per child per year. This is good if you have high childcare costs (saving 20% of costs up to £10k/child/year). 

The scheme is open to self-employed parents as it does not rely on employers to facilitate it. 

You’ll get an online account and anyone can pay into it. This is great if grandparents or other relatives want to contribute. 

Take a look at the government website here.

Childcare Vouchers

Childcare Vouchers are only available if you’re still receiving them. They closed to new applicants in 2018. There is a decision to be made about changing to tax-free childcare if you are on childcare vouchers and this would take about a thousand words to explain. We cover it in more detail on our main post. 

Childcare vouchers are good for families with parents earning over £100k and families with children over 12. They are good for families with employed (i.e not self-employed) parents, and also families with one parent not working (unlike tax-free childcare). If both parents are working though you can both claim vouchers for the same child. 

To get the vouchers you have to ‘buy’ them with your pre-tax salary. Basic rate taxpayers can sacrifice £243 a month of their salary but this goes down to £124/month for higher rate taxpayers and £110 a month for additional rate taxpayers. 

Universal Credit for Childcare

This is not suitable for higher earners. 

Your entitlement for sections of universal credit goes down as your income climbs so those earning more than £50k would not be entitled to any payment. You can’t claim tax-free childcare when you claim universal credit so doing so would be not the best course of action.

Where to find more information on Childcare in England

Check out our in-depth post on paying for childcare in England here. 

Childcare for higher earners in Scotland

Funded Early Learning and Childcare – 16 Hours Free Childcare for 2 year olds in Scotland

All 3-4-year-olds in Scotland are entitled to some amount of free childcare (see below). Only some families will be able to access this childcare for their 2-year-olds however. The current entitlement for those that qualify for this scheme is 16 hours a week during term time but this is set to rise to 30 hours in August 2020.

If you’re a higher earner you’re unlikely to qualify for this scheme for 2 year olds because you need to be receiving a qualifying benefit. 

You may be able to qualify however if your child is disabled or has special educational needs (SEN), or if they are a Looked After Child or under a kinship order. 

Find out more, including information specific to your local council area, here. 

Tax Free Childcare

You should be able to qualify for this if both parents in the household (or the one single parent) are in work and earning less than £100k. 

Tax-free childcare is said to be tax-free because the government will top up parents’ childcare payments with the 20% basic rate tax they’ve already paid on it when it came out of their payslip. This is only really ‘tax-free’ if you don’t pay any higher rate or additional rate tax though. 

Tax-free childcare is available to parents in households where neither parent earns a taxable income above £100k. It is also only available for children under 12 which is pretty restrictive. If you manage to fall within the eligibility criteria then you can save up to £2000 per child per year. This is good if you have high childcare costs (saving 20% of costs up to £10k/child/year). 

The scheme is open to self-employed parents as it does not rely on employers to facilitate it. 

You’ll get an online account and anyone can pay into it. This is great if grandparents or other relatives want to contribute. 

Take a look at the government website here.

Childcare Vouchers

Childcare Vouchers are only available if you’re still receiving them. They closed to new applicants in 2018. There is a decision to be made about changing to tax-free childcare if you are on childcare vouchers and this would take about a thousand words to explain. We cover it in more detail on our main post. 

Childcare vouchers are good for families with parents earning over £100k and families with children over 12. They are good for families with employed (i.e not self-employed) parents, and also families with one parent not working (unlike tax-free childcare). If both parents are working though you can both claim vouchers for the same child. 

To get the vouchers you have to ‘buy’ them with your pre-tax salary. Basic rate taxpayers can sacrifice £243 a month of their salary but this goes down to £124/month for higher rate taxpayers and £110 a month for additional rate taxpayers. 

Universal Credit for Childcare

This is not suitable for higher earners. 

Your entitlement for sections of universal credit goes down as your income climbs so those earning more than £50k would not be entitled to any payment. You can’t claim tax-free childcare when you claim universal credit so doing so would be not the best course of action.

Where to find more information on Childcare in Scotland

Find out lots more information about paying for Childcare in Scotland here

Childcare for higher earners in Wales

Flying Start

Flying Start gives eligible families 12.5 hours a week of childcare (only available as 2.5 hours a day) and for 38-42 weeks a year. It is for children aged 2. It also provides parenting classes, and enhanced health visitor service and helps with your child’s speech and language if they need it.

It is controversial because it is being brought in area by area and is, therefore, a postcode lottery. Some higher income families will qualify for it if they live in an area that is covered by flying start. Conversely, there will be lower income families outside of flying start areas that don’t qualify.

You can take a look here to see if you live in a Flying Start Area

Foundation Phase Nursery and the ‘Childcare Offer for Wales’

Tax Free Childcare

You should be able to qualify for this if both parents in the household (or the one single parent) are in work and earning less than £100k. 

Tax-free childcare is said to be tax-free because the government will top up parents’ childcare payments with the 20% basic rate tax they’ve already paid on it when it came out of their payslip. This is only really ‘tax-free’ if you don’t pay any higher rate or additional rate tax though. 

Tax-free childcare is available to parents in households where neither parent earns a taxable income above £100k. It is also only available for children under 12 which is pretty restrictive. If you manage to fall within the eligibility criteria then you can save up to £2000 per child per year. This is good if you have high childcare costs (saving 20% of costs up to £10k/child/year). 

The scheme is open to self-employed parents as it does not rely on employers to facilitate it. 

You’ll get an online account and anyone can pay into it. This is great if grandparents or other relatives want to contribute. 

Take a look at the government website here.

Childcare Vouchers

Childcare Vouchers are only available if you’re still receiving them. They closed to new applicants in 2018. There is a decision to be made about changing to tax-free childcare if you are on childcare vouchers and this would take about a thousand words to explain. We cover it in more detail on our main post. 

Childcare vouchers are good for families with parents earning over £100k and families with children over 12. They are good for families with employed (i.e not self-employed) parents, and also families with one parent not working (unlike tax-free childcare). If both parents are working though you can both claim vouchers for the same child. 

To get the vouchers you have to ‘buy’ them with your pre-tax salary. Basic rate taxpayers can sacrifice £243 a month of their salary but this goes down to £124/month for higher rate taxpayers and £110 a month for additional rate taxpayers. 

Universal Credit for Childcare

This is not suitable for higher earners. 

Your entitlement for sections of universal credit goes down as your income climbs so those earning more than £50k would not be entitled to any payment. You can’t claim tax-free childcare when you claim universal credit so doing so would be not the best course of action.

Where to find more information on Childcare in Wales

Take a look here for much more in-depth information on how to pay for childcare in Wales. 

Childcare for higher earners in Northern Ireland

Funded Preschool Education – 12.5 hours per week for 3-4 year olds – Limited, rigid and inflexible

This scheme aims to provide 12.5 free hours a week of ‘quality preschool education’ for kids between 3-4.

It may only be taken in 2.5 hour slots across the five days. Unfortunately, it is only available during term time and there is no school holiday provision.

It is available to all 3-4 year olds regardless of where in Northern Ireland they live and how much their parents earn. There are no income limits on this scheme so everyone should be able to benefit from it. 

However, many preschools have a waiting list and many prioritise children whose families receive qualifying benefits (as well as criteria like distance from the preschool and whether the family has had older children attend before). You should still be able to get your child a place but be aware of this, you may not get your first choice.

Find more information about this scheme such as the deadlines for applications here.

Tax Free Childcare

You should be able to qualify for this if both parents in the household (or the one single parent) are in work and earning less than £100k. 

Tax-free childcare is said to be tax-free because the government will top up parents’ childcare payments with the 20% basic rate tax they’ve already paid on it when it came out of their payslip. This is only really ‘tax-free’ if you don’t pay any higher rate or additional rate tax though. 

Tax-free childcare is available to parents in households where neither parent earns a taxable income above £100k. It is also only available for children under 12 which is pretty restrictive. If you manage to fall within the eligibility criteria then you can save up to £2000 per child per year. This is good if you have high childcare costs (saving 20% of costs up to £10k/child/year). 

The scheme is open to self-employed parents as it does not rely on employers to facilitate it. 

You’ll get an online account and anyone can pay into it. This is great if grandparents or other relatives want to contribute. 

Take a look at the government website here.

Childcare Vouchers

Childcare Vouchers are only available if you’re still receiving them. They closed to new applicants in 2018. There is a decision to be made about changing to tax-free childcare if you are on childcare vouchers and this would take about a thousand words to explain. We cover it in more detail on our main post. 

Childcare vouchers are good for families with parents earning over £100k and families with children over 12. They are good for families with employed (i.e not self-employed) parents, and also families with one parent not working (unlike tax-free childcare). If both parents are working though you can both claim vouchers for the same child. 

To get the vouchers you have to ‘buy’ them with your pre-tax salary. Basic rate taxpayers can sacrifice £243 a month of their salary but this goes down to £124/month for higher rate taxpayers and £110 a month for additional rate taxpayers. 

Universal Credit for Childcare

This is not suitable for higher earners. 

Your entitlement for sections of universal credit goes down as your income climbs so those earning more than £50k would not be entitled to any payment. You can’t claim tax-free childcare when you claim universal credit so doing so would be not the best course of action.

Where to find more information on Childcare in Northern Ireland

Check out our in-depth post here.

This is one of the benefits that is not being superseded by universal credit. 

Child benefit is available to parents of all children up to age 16 (and up to 20 if the child is in full time education or training). 

There is no limit to the number of children for which you can claim child benefit. If you’re a couple, only one of you can claim for a particular child. 

The claim for your first child is worth £20.70 per week and for each subsequent child the claim is worth £13.70 per week. It is usually paid every 4 weeks. 

Child Benefit will cease when your child gets too old, leaves full time education or begins a paid job or apprenticeship (over 24 hours a week). 

What is the High Income Child Benefit Charge?

Now the catch for high earners.

If one of you earns more than £60,000, you won’t keep any of this money. I say ‘keep’ because you can still claim it and then the tax man will claim it back from you through income tax. There are reasons why you might want to do it this way, rather than not claim at all, which I’ll explain below. 

If one of you earn between £50,000 and £60,000, you’ll get to keep a portion of your child benefit money (i.e you’ll be paid the full amount and a portion of it will be claimed back by the tax man via income tax). The amount that the tax man claims back is 1% of the child benefit money for every £100 you earn between £50-60k. So if you earn £55k you’ll have 50% of the money taken back off you.

Don’t make the mistake of not claiming child benefit if you earn more than 60k

What if you earn more than £60k? Why bother with it?

Say you’re a couple where one parent earns >£60k and the other is a full time mum/dad. The parent who’s looking after the children and not being paid an income (and therefore not paying national insurance) needs to protect their state pension. 

A lot of people don’t know that reaching the state pension age isn’t all you have to do to qualify for it. You need to reach a minimum number of national insurance credits (which you get for a year of paying contributions). 

The ‘new state pension’ is for men born after 6/4/1951 and women born after 6/4/1953, with the older pension there for those born before these dates. 

The older pension needs people to have 30 (!!) qualifying years of national insurance contributions to get it. However, the newer pension is more lenient here with only 10 years needed. 

Some people may not have worked and paid contributions for this length of time. 

If you’re not paying NI contributions through work, you have kids and you’re a full-time parent, you need to claim child benefit to protect your state pension. 

Not qualifying for the state pension would be a big problem, even for people and families with a high income. 

Claiming child benefit gives you these NI credits, you (or your partner) will just have to give the money back through income tax. You can always put the child benefit money aside in a high interest savings account too. 

If you were born before 1951/1953 and you’re worried about not having enough NI contributions under your belt you can gain more by looking after your grandchildren.  

You may wish to speak to a financial advisor or pensions advisor about these matters.

What about other Grants such as Surestart and Best Start Grant?

These are additional one off payments that can be applied for depending on the age of your child or how far along your pregnancy is. They vary between England, Wales, Scotland and Northern Ireland.

You have to be in receipt of one of a list of benefits to be able to claim them. So in general, higher earners are rarely going to be eligible for these grants.

There are special circumstances however where higher earners may benefit from them. Those claiming benefits related to disability and parents under the age of 18 may be able to claim. You should speak to a benefits advisor if this is the case.

If you’ve read the above information on the various childcare schemes in the UK, you’ll have gathered there are income limits on most but not all of them. 

‘Can’t high income parents just pay for it themselves?’

Many people posting on parenting and childcare fora would say those earning >£100k shouldn’t get help with childcare and the money should be used to provide more help for less fortunate. I can see this point.

I can also see that these schemes look at individual earnings rather than that of a couple. A high earning couple paid £55,000 each (£110,000 combined before tax) would be able to a lot claim more childcare help (and even some child benefit money) than a couple with one earner of £100,000 and one lower/non-earner. This doesn’t seem fair. 

If your income is just over the limit you should speak to a financial advisor about your options (see below). If your taxable income fell below the £100k level you’d open up options such as Tax-free childcare and 30 hours per week for 3-4 year olds.

Read through the sections above relevant to your area. The explanation for each scheme will state whether you can claim if you earn over £100k. This is the income limit for several of the schemes in each country, but there are some you can access!

Maybe, but seek proper advice first. 

Say you earn £51k or £101k, or just above a significant limit for a certain scheme. You may be better off making an extra pension contribution. This will reduce your ‘taxable income’ to beneath the income limit for the relevant childcare scheme and you will benefit from the extra pension contribution. An added incentive is that you’re likely to benefit from tax relief on your pension contribution. However, the tax calculations can get pretty complicated when in these situations. 

Another option if you have it is to go part-time, then you’d gain access to childcare schemes you didn’t previously as well as getting to spend more time yourself with the kids. This is what I am planning to do shortly. 

Speak to a qualified financial advisor or accountant about this in order to gain the best advice for your situation. Salary sacrifice could affect other systems and benefits. You need to be sure after doing your research and speaking to a qualified advisor before committing to these options.  

Is it even worth going back to work? Should I be a full time mum or full time dad?

The conservative government always like to say that they want to make work pay. That’s all well and good, but if your childcare and commuting costs are as much as you take home from work, you’ve got to look at your options. 

If you’re considering leaving work to focus on childcare full time, good luck! I’d just give a gentle warning to look at how it would affect your entitlements to the childcare schemes you currently get. 

For example, if one parent stopped working they’d lose their entitlement to Tax free Childcare and 30 free hours for 3-4 year olds (they’d still get 15). 

Of course you’re stopping work to provide the childcare yourself. However if you’d then struggle to afford to send the kids to the clubs and activities (eg sources of childcare) they’d been going to, it’s worth consideration. 

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