Chauffers: Tax deductible. Childcare: Not tax deductible. Why?

Anna, a mother from Poland writes...

"I am originally from Poland, but have lived in the UK for 3 years. My husband is English and we live in Hampshire.We have a son, who is nearly two.

I am trapped at home and I can't work, despite having 2 degrees. UK has the most expensive childcare in Europe, and possibly in the world. Last year's inflation was 4%, but the cost of childcare rose by 7%. Most countries on the Continent heavily subsidize nurseries, so that women don't have to hand over their entire salaries to nannies or nurseries. My Danish friends pay the equivalent of 90 pounds for full-time nursery per month. My friend here pays approx. 900 pounds - ten times as much, though average earnings here are by no means ten times the average Danish salary. Nurseries are either for the rich or those on low income or single parents - once again, middle class is the one bearing the brunt of such extortionate costs of childcare.

The government's record on this issue is a disgrace - and as long as nothing is done about making childcare more widely available and, above all, affordable, things will only get worse ad the birthrate will continue to fall. My English friends' attitude is that they can't change the system, so they make do as best they can - but I believe we need to speak up about it, as putting up with the bad situation is not the answer."

Thank you, Anna. Never a truer word spoken. In Britain, working women are effectively taxed TWICE. First, the Excequer taxes them. Then, they have to pay their childcarer's wages, including that person's TAX, NATIONAL INSURANCE and, if they employ childcare in the home  EMPLOYER'S TAX (please excuse the capital letters, but this issue makes me VERY ANNOYED) - all, I repeat, out of their own net wages.

Let me give you an example. Say you paid your childminder/nanny an average salary of £300 a week. You would then receive a bill from the Inland Revenue of approximately £560 a month for his or her tax and national insurance. That means childcare costs of approximately £450 a week, which is the equivalent of roughly £24,000 a year. But remember, you have to find that money out of your own NET income because childcare in Britain is not tax deductible (interestingly, chauffeurs are. What does that tell you about this Government's priorities?). Add roughly one third... and you need to earn another £8000 a year - JUST TO COVER YOUR CHILDCARE COSTS.

That's 30 grand before you've even bought so much as a coffee and a croissant on your morning commute. But it's okay because CHAUFFEURS are tax deductible. Hurrah.

I'm going to lie down in a darkened room for a bit now and calm down.

 

Comments

[michael jones]

I was searching for some information about the maternity leave but i am glad that i have found your site! It is really good one!

[Emily]

'I'm trapped at home & I can't work'.Gosh, I never realised that the life of an Alpha Mummy (who on earth thought of that name...Absent Mummy might be a better one) was so damned hard.
Anyone would think you were forced to have children,did you think it would be like having a new car/house etc? Something else to put on your expenses list?
What's wrong with trying to enjoy your child for the few years they're at home with you?
You are more important to your child than you know and unless you involve yourself with them instead of 'nanny' you'll never know what you may have missed.
I'm finding some of the views on this site increasingly sad...I feel like emigrating somewhere where motherhood is held in high-esteem.It's as if you've thought of everything except the one thing that's truly important.
We mustn't think 'childcare... is a woman's issue'...I say being a mother is very much a woman's issue and it's about time you all realised that.

[supermother]

But the chauffeur has to be taking you from one work meeting to another, that's the rub, the old tax test that the expense is wholly, exclusively and necessarily incurred on work, not on allowing you to work or to get to work, but on work. So I can hire someone as I do to do bits of secretarial work and that's tax deductible and spend the time she does not that in the garden with the children but if instead I do that work myself and pay someone to mind the children during the same time it isn't. There was case once where a barrister showed her nanny did often take devlieries of papers at home and do some bits of work and I think 10% of the nanny cost was held to relate to the legal work she was doing for her boss but that's hard to prove and that was someone who was self employed, not employed.

We also need food to enable us to be healthy enough to work and a dog sitter if we have a dog so we can work etc etc so it's a bit of a minefield if we say childcare is tax deductible and benefits rich mothers who can afford it.

I think Labour is keener to ensure any money goes into provision of free nursery places for mothers on benefits. When we had a full time nanny the gross cost was about £30k a year. If instead that were taken out of income taxed at 41%, my marginal rate, in effect I'd keep another 41% of that tranche of income whch would of course be very welcome but expensive to tax payers. Anyway I think once you've paid a set sum a year in tax, say £50k, you should get a letter of thanks from Blair and no obligation to pay anything higher than that and you keep 100% of what you earn thereafter plus your certificate of thanks from the nation for the sterling job you have done in adding to the nation's tax coffers.

[Lisa]

There may be a simple solution: refer to your nanny/childcarer as a chauffeur, and make them tax deductible.

[Alison]

I totally agree- paying childcare expenses out of either parents' income in a disgrace- after all, without childcare we wouldn't be able to work, and so contribute to society by paying tax. There is system (purchasing childcare vouchers through employers)in place that allows £239 a month to be paid directly to carers out of each parents GROSS income, but this is entirely reliant on the parental employers setting up the mechanisms to make this payment, and the childcare provider being properly registered.

However, it just shows that it CAN be done- we just need to get the amount you can pay up to a more realistic level.

[kieransmum]

Yes, it's awful. Let's organise a mammoth political campaign to change the status quo.
Oh no, I forgot - we're all too bloody tired.

[supermother]

Yes, but please please on an alpha mummy site let us never suggest childcare or paying for it is a woman's issue. That is hugely sexist and not tolerable. Men and women pay these fees and they as much come out of male wages and women and any calculations should be done on the basis of that.

Many people move to the UK because our tax rates are much lower. Difficult issues. At least it makes school fees acceptable when you come to pay them because you've been paying a nanny previously, kind of gets you in training for that stage if you're an alpha mummy.

[Jennifer Howze]

I agree - it's completely offensive. The one upside is that full-time nursery for our three-year-old feels like winning the lottery because there's no nasty surprise every quarter where you're coughing up hundreds of pounds pulled from your...hat.

Plus, because you're in danger of becoming the worst kind of employer because even though you only have one employee, if your nanny goes on maternity leave you have to keep her job open and can only find temporary help. Same thing with sick leave. We loved our nanny but when she was out for two weeks with back problems (and we had to find last-minute cover) we ended up asking ourselves, does this work for us at all?

I'm with you on this, Sarah.

[Jennifer Howze]

I agree - it's completely offensive. The one upside is that full-time nursery for our three-year-old feels like winning the lottery because there's no nasty surprise every quarter where you're coughing up hundreds of pounds pulled from your...hat.

Plus, you're in danger of becoming the worst kind of employer because even though you only have one employee, if your nanny goes on maternity leave you have to keep her job open and can only find temporary help. Same thing with sick leave. We loved our nanny but when she was out for two weeks with back problems (and we had to find last-minute cover) we ended up asking ourselves, does this work for us at all?

I'm with you on this, Sarah.