Why your nanny should be tax free

Childcare costs in the UK have risen by 19% over the last year. Given that most of us would have considered ourselves lucky to have had a 2% pay rise over the same period, that’s a hell of a hike.

It also might give our leaders something of a clue as to why there aren’t as many women in work as they would like, and more particularly, why there aren’t as many women in high positions as they would like.

Say you are 35 and heading for the top in your career. You make £55,000, and have hopes of making more like £80,000 by the time you hit 40. Sounds good. But there’s a hitch.

You’ve got two pre-school-age kids and you live in London. Nursery care comes to at least £10,000 a child, and probably more like £12,000. It could even be more.

A reader tweeted me yesterday to say it cost them £28,000 for two children. However, if we stick with £12,000, so £24,000 for two, the cost means that the mother* has to earn around £33,000 just to break even. On her £55,000 salary, she is clearing £14,800 after tax.

Chuck in her travel and incidental expenses (to say nothing of the nightmare of mornings spent dressing, feeding and dropping tiny children off at nursery before going to work herself), and you can see why she might find it all a bit of a waste of time. But worse, nursery isn’t enough to cover the needs of a modern career.

If she is aiming for the top, she needs flexibility. She needs to be able to be in the office long before her local nursery opens on occasion, or perhaps every day. She needs to be able to work unpredictable hours, to go on overnight trips and so on. She needs a nanny. So, let’s look at that.

A good live-out nanny in London who will cover her employer’s hours at work and her travel (remember the nanny always works longer hours than the working mother) will want around £600 to £700 a week in her pocket after tax (see here for average fees).

Let’s say we find a cheap one at £560 a week. Once you have included her income tax and national insurance (NI), and the additional employer’s NI, that comes to £826 a week.

That’s £42,952 a year out of your own net salary. So, to break even on childcare alone with a live-out nanny, the mother has to make just over £60,000. You can cut that by going live-in – if you have the space (which your average 35-year-old in London just doesn’t).

But even then the nanny will want £400 a week and the total cost will be around £30,000 a year – requiring a break-even salary of around £40,000. And that is one of the reasons why a huge number of women give up on high-flying careers in their 30s, and hence why there aren’t as many women running companies and the country as all political parties claim they believe there should be.

We all want our children cared for flexibly in our own homes. But mostly we can’t pay for that and also have some cash left over to reward ourselves for bothering to go to work in the first place. So, what do you do about this?

It entirely depends what result you are after. If you consider this to be a matter of no significance and if you aren’t much bothered by how many women get to fulfil their career ambitions, you do nothing.

If you think there should be less gender inequality at the top (and for the record I’m far from convinced that this is a worthy goal in itself), you might note that domestic staff are the only staff paid out of anyone’s post tax rather than pre-tax earnings, and wonder if it might be a good idea to change that for the childcare of working parents.

That would mean that – in a massive expansion of our current childcare voucher scheme – all registered childcarers could be paid out of a parent’s pre- rather than post-tax income, perhaps via the PAYE system; something that would make the break-even salary on a live-in nanny £30,000 a year, and that on a live-out nanny, £42,000 (or even less if we could dump the employer’s NI too), and along the way keep many more of us in the full time workplace**. Assuming that’s what we want.

I know you will all want to have a good argument about this. If you want to do it in person, bid here to have dinner with me (all for a good cause). The current bid is less than the price of a nanny for a week. Bargain.

* I’m using ‘mother’ here, not ‘father’, for the simple reason that while there are many more female breadwinners than there were, it is still the case that the majority of higher salaries are still earned by men, so it is the mother’s salary that is of interest when it comes to childcare costs. There are also still many more female than male single parents. You can however read ‘mother’ as ‘father’ all the way through if you prefer.

** Here’s a tweet from @lizchong1 on the matter yesterday: “Current setup makes it almost imposs to work unless you earn lots/accept you’ll make v little. Many friends dropping out”.

  • Cleverwithmoney

    I think this is perhaps taking the Nanny State idea a bit too far. Given the UK’s £1.4 trillion (£20,000+ for every man, woman and child and still rising) debt I’m not convinced that this is a good way to spend our taxes. Everyone has to (some are less good at it than others) make decisions about what they spend their money on every day and this is just another one of them. If more people are dropping out then at least the laws of supply and demand suggest that childcare costs may come down. As average house prices in London rose by some £60-65,000 last year those of us in the sticks might be forgiven for being less than sympathetic.

  • mr clyde

    Only £28 grand – bargain. My Mother’s care fees are £3k a month which she has to find out of taxed income after a lifetime of my parents paying in. Before I have any sympathy for people who choose to work instead of bringing up their children I would suggest there are more deserving groups.

  • r

    Hmmm! A sexist article from Merryn. I have never understood why we (the country) should aim for more women at the top in business. I am all for equality and I believe that women should have an equal opportunity to get there if they are equal in capability to their peers. However, why should it be an aim? Surely, quality of life is just as important? If a woman has children, why would she want to farm them out all day and every day? To me, it defeats one of the reasons of motherhood. The idea that the taxpayer should pay for it is appalling. You will be asking for the housekeeping costs to be tax-allowable as well, soon!


    • Bayard

      I agree, a sexist article, but you are being equally as sexist, r. If you believed in sex equality, then you wouldn’t be implying that childcare is only about motherhood, or that women should be solely responsible for taking time off from their careers to bring up children, or solely responsible for the housekeeping either. The fact that this is the norm, doesn’t make it any the less sexist, so if you want to point the finger, try and get your ideas about child-rearing out of the C19th and into the C21st.
      Merryn is being sexist in exactly the same way as you, and she was just as sexist the last time she brought this idea up. Why should childcare costs be paid by the mother? Why not by the father? In the end, they end up being paid out of the couple’s joint income, but this is not what she says, and even her disclaimer at the end implies that childcare costs are not paid out of the “breadwinner’s” income.

  • loads2

    We are already pandering FAR TOO MUCH to couples with kids:

    1 We have a 2 tier benefits system that pays nice tax credits to those with kids – even those that are working. Why should the taxpayer pander to those with kids at the expense of those that don’t have any ?
    (are responsible enough not to have any)

    2 My Clyde’s comments are spot on. I also have a alzheimered Mum who has paid into the system but who has to fund her own care out of already taxed income. She has paid more into the system than the mums of today – the mums of today are younger than retired people who worked all their life and had no help whatsoever from the state when they were bringing up kids

    3. Its all well and good posh editor mervyn going on about wanting tax subsidies and tax allowances to pay for childcare. why the dickens should I give her or anyone else give her a subsidy when it was a woman’s choice a lifestyle choice to have kids?

    4. Mervyn has written positive stuff about your colleague Frisby’s “life after the state” book. What mervyn is now asking is now the opposite of what the book “life after the state” suggests.

    5. Mervyn (in Frisby’s own words) you are a “rent seeker” – and your latest suggestion of tax breaks for those who chose to have kids is exactly the sort of privilege chasing that your colleague’s book criticises.

    6. Perhaps you could explain to all the many single people or couples without kids why even more of our taxes should support your lifestyle choices of having kids and then expecting us to pay for them through our taxes, council taxes, and the 2 tier benefits system that pays tax credits, child benefits, and allows couples with kids a whole host of other benefits at the expense of those who have been responsible and GREEN enough not to have kids

    7. Rather than moan about the cost of kids, wise up. You had them. You are responsible for them. The State is not.

  • Ellen12

    I knew this dog whistle article would provoke a stream of ‘You had them so pay for them.” but I totally agree with you but think it is a pity you chose to focus on the most successful women – as that will always upset a hardcore of men (and some women).

    The point the commentators (above) miss is that you are not looking for any sort of a state handout. Your childcare expenditure comes about as a consequence of you working and contributing to the public purse. If you were not a taxpayer, you would have no need of childcare. And so, I agree that childcare should be a legitimate tax deductible expense. I also thing tuition fees should be tax deductible, if you assume the person needed the qualification to do the job. It would be better for all working families to get rid of all these ‘in work benefits’ and replace them with legitimate ‘tax deductibles’.

    However, if we accept for a moment that loads2 and others (above) are correct to think that families who work should not be able to pay childcare out of their gross earnings then how do they justify allowing anything as tax deductible. All tax then should be paid on gross, not net, earnings. This would mean the end for mileage allowances, subscriptions, capital allowances, tools, meals, hotels etc. Indeed, why should the government bother to subsidise landlords to the tune of their interest charges or business owner for light and heat. All of these are necessary expenses to allow the people and businesses to operate, exactly as childcare is. Comparisons to elderly care does not seem relevant to what the author is trying to demonstrate.

  • Martin G

    Solution – become a banker. They are so desperate for talent that they need to pay 2 x salary as a bonus in order to retain talent, or so we hear. Increase the talent pool, and the competition for those jobs. The salaries will reduce – but still be good enough to pay for childcare. Even – dare I say – if one parent wants to stay at home to look after the kids, there will be enough money to allow that and scrap the nanny! Seriously though, we ought to be looking at what are the pros and cons to the state of encouraging parental child care, especially among the meritocracy. Does that result in better outcomes for the children they raise, or is there no difference? I’m all in favour of children – after all who else is there to keep the state social ponzi scheme going?

  • mr clyde

    Ellen12 – Dear me! Please explain why child care is a legitimate business expense and incapacitated parent care is not! If we apply your argument then boarding school fees, private health even holidays could be considered as legitimate expenses to allow people and businesses to operate. Why should anybody pay any tax at all, instead of just looking after themselves?

  • Boris MacDonut

    So one week Merryn says the taxpayer should not subsidise the poor so they can take up poorly paid jobs ( and gain some dignity) nor should we subsidise employers who pay low wages, but thsi week we should be offering incentives to rich women so they can achieve personal success while ignoring their children.
    An awkward contradiction Merryn. Please explain.

    • Tyler Durden

      I have to concur. Having children is a choice, not a right. You make sacrifices because you believe it is worth it. If work isn’t paying enough to look after children then giving up work is the only logical option. Expecting some magic money to appear out of nowhere to pay for this is just fantasy.

  • Merryn

    @loads2 Mervyn?

  • Merryn

    As I said in the post I am far from sure that there being more women at the top is a useful target in itself. The point is that all political parties insist endlessly that there should be more women at the top and that they want more women at the top. If that is really the case this is a suggestion as to how they can achieve that aim. There isn’t much point in all their other equality initiatives if they don’t sort out the childcare issue first.

  • Ellen12

    Mr Clyde, You do not seem to understand that childcare is crucial to a parent who works and unless the parent is permitted to take the child/ children to work the n the cost of childcare is work related expenditure in the same way as anything you would find on a company’s profit and loss account.
    A child certainly does not need to attend boarding school, certainly not a pre school child, for his/her parent to work! And even school children have the option of attending a state school so it is nonsense to attempt to invalidate my argument by drawing this type of irrelevant comparison.
    I would argue there is very little justification to allowing anything be tax deductible if childcare is not considered to be … unless, of course, parents are free to take their children to work with them.

  • Boris MacDonut

    Why not make all domestic servants tax free,then we can get properly back to the Downton Abbey idyll the Brits so cherish. Pleading for more tax concessions for the rich is abysmally short sighted.

  • mr clyde

    Ellen12 – The point that I was trying to make is that I do not consider it reasonable to expect other taxpayers to subsidise a lifestyle choice. Not least whilst there are massive gaps in the the provision of care for people who have had no choice at all.

  • Ellen12

    Boris, simply by making the harsh and unfounded judgment that rich women ignore their children loses you credibility in this debate. And I would like to refer you back to the many times you have claimed that the very high house prices we are experiencing at the moment are a result of large numbers of mothers continuing to work full time and working mothers have become a necessary in integral part of the workforce.

    Mr Clyde, I have no middle ground to find with you. Describing a child as a ‘lifestyle choice’ only illustrates that society view children as commodities and their interests are no more important then that of the family pet. They are the most underrepresented sector in society on I would be in favour of parents getting an extra proportion of a vote for each child in elections. That might shift the balance of power enough for politicians to represent them better. For me, children are people and have as much a right to be here (and represented) as you or I. And you, Mr Clyde, are your parents ‘lifestyle choice’. Furthermore, tax deductibles are not funded by other taxpayers. They are funded out of the gross earnings of the taxpayer in question. Elderly care is provided by the UK government for those who have few assets. I know it is not ideal but the provision is there for everyone. The losers in the lack of funding for elderly care for those who have assets are really their heirs and not the recipient of the care provided. But again this is a completely different debate.

    • Bayard


      If Merryn was self-employed (and she may be) then one can make an argument that childcare could be considered a legitimate business expense. Otherwise not. As a employee, every expense has to be paid out of post-tax income, whether work-related or not, unless you can persuade your employer to pay it for you. If the government starts making exceptions to this rule, then everyone will want everything to be paid from pre-tax income, and, no doubt, have compelling arguments for doing so.
      Much more to the point, why is childcare so expensive and why has the cost increased so much in the last year? The two most likely reasons are an increase in red tape, which is something the government can do something about, or a realisation by childcare providers that the market will bear such an increase, in which later case, making childcare costs tax-exempt will achieve nothing, they will simply increase by the amount of tax saved by the parents.

  • Merryn

    @Boris.. the whole point here is that it is not about catering for the rich, but catering for those all the political parties insist they want to become successful.

  • Realist

    For a start, this 19% rise in childcare needs to be looked at as to why it is rising so much and work needs to be done to get childcare costs down, as £600-£700 after tax is an absolute joke.
    Also with regards of ‘children as a lifestyle choice’, well if you value your career that you have to do ‘long office hours to get to the top’, then you clearly must value your children as ‘commodities’. The modern belief maybe that you can have ‘everything’ isn’t always true, it sometimes has to be one or the other. Or if your career is that important, put up with expenses that equal your income for a few years.
    High house prices are indeed another problem which probably has a knock on effect. Not only do both have to work to buy a house, but even years later they cannot afford to stop if they decide to have children. This has more demand on childcare and thus pushing childcare costs up.

    • Boris MacDonut

      I agree realist. You could equally say folk living in Newcastle are disadvantaged by the cost of commuting to London ,so their season tickets should be subsidised by the taxpayer. Having kids, like where you live, is a lifestyle choice you are either prepared to put up with or not.

    • Tyler Durden

      Yep. If the cost of childcare is rising this much then there are other issues at play.

  • GFL

    This article was silly 6 months ago, when it was originally written and it’s still silly now. Having children is a life style choice, it should not be subsidised by the general population.

    The thing I really find funny is MW bang on about how the state is subsidising employers that pay minimum wage. If minimum wage was increased to £10/£12 per hour, the ‘poor’ lady in this article that was ‘unfortunate’ enough to have kids would be left with nothing.

    As people above have rightly pointed out, there are other situations that require tax breaks more than middle class women that are throwing their toys out of the pram because they cannot climb the corporate ladder as quickly as they would like. boo-hoo

    That being said I agree we do need a tax overhaul for EVERYONE so we can ALL make freer life style choices; this involves lower taxes and less state interference. But I don’t want tax breaks for a particular subset of the population only – I don’t want government picking winners and losers.

  • mr clyde

    Ellen12 – how we got to children’s rights from your assertion that someone else should pay for your choice to go to work instead of looking after your kids I don’t quite know. However I would expect that, if children were indeed given a vote, they would probably vote for one of their parents to stay at home and look after them. The end.

  • Ellen12

    Mr clyde, you keep missing my point. Is that deliberate? I never suggested other taxpayers pay for the childcare costs of any family. I think childcare costs should be tax deductible against the gross earnings of the parents. Nothing to do with other taxpayers. It is no more a state handout than allowing a van and tools be tax deductible for an electrician or professional subscriptions for a lawyer. And incidentally, before you get on your high horse, my children are old enough that childcare is no longer a major issue for me. The End.

    GFL, the government pick winners and losers every day. That is the job of George Osborne. I would just ask that he spread it fairly across the board. And Realist, is it the lifestyle choice of those who do not have children not to have a stake in the future and hope that other peoples children will be charitable enough to look after them in their old age?

    There is far too much moral highground being claimed by mostly male posters on here. The article didn’t ask for opinions on how other people raise their children but, as always, every Tom, Dick and Harry loads up with plenty of ammunition to abuse passing mothers with whether she be a single parent on benefits or a working mother enjoying a bit of success.

    • GFL

      Ellen this has everything to do with tax payers – if you allow this cost out of gross pay the government has a short fall, it either makes cuts or it finds the money from elsewhere. There is no difference between this and any other benefit!

      There are loads of costs that are associated with going to work that most people have no choice but to pay, for example travel, lunch, formal dress wear, etc. In the police they even have to pay for their own torches, boots and study books out of net pay. Where do you draw the line? And think of all the administration cast!

      And it is bananas to say working women deserve a tax break more than those paying for the health care of a relative.

      As I said there should be a tax overhaul, part of that overhaul would be to reduce taxes and stop half of the stuff that is considered an expense for a self employed person/limited company. And why all income is not treated the same is beyond me (but that’s a topic for another day)

      • Ellen12

        Uniforms for employment are tax deductible as are many other ‘in work’ expenses. Have a look on the HMRC website and that will give you an idea of some of the rather generous and unnecessary ‘state handouts’ to people in business that, by your reckoning, working mothers and others fund through their taxes.

        Women do not make babies on their own. This is a very basic scientific fact that seems to be lost on a great deal of men who regard childcare as a problem for women to solve. Maybe there is an underlying assumption that women are the only worthwhile parent … but this is not always the case even if it is, in your case. However, fathers or mothers both need childcare in order to be able to work and that makes childcare a work related expense.

        Who is paying for the health care of a relative? Apart from the fact that this is a total red herring, healthcare in the UK is made freely available to all citizens. Mr clyde’s mother is paying for her own care, if that is what you mean. How does that equate to a work related expense for him?

  • JT

    I agree with the basic premise of Merryn’s article, and indeed with Ellen12.

    My wife, who is currently on maternity leave, is a case in point.

    Our view is that it would be a good idea for our son to attend a nursery 2 – 3 day’s a week from age 1. We wouldn’t be ‘outsourcing’ childcare, we just happen to think he would benefit from socializing with other children on a regular basis.

    My wife could also then return to work part time. However, the cost of childcare is such that even though she earns more than double the average salary, she’d probably pocket about £4k annually after tax. Frankly we don’t see the point. Call that a lifestyle choice if you want. I personally think it’s a huge waste that someone who has been educated to degree level by the tax payer and is hugely talented and conscientious should be turned away from a career in this way. She works in digital marketing, which changes fast. In a couple of years, she’ll be so out of date she’ll have no chance of getting back in.

    • Tyler Durden

      The I’m afraid there is no point in your wife working, unless your wife believes that keeping in work is important even if you’re just breaking even. I’m sorry, but there is no magic solution to this and other taxpayers cannot make up this shortfall because tax revenue is weak and increased borrowing won’t happen because we’ve shot all our bolts on that front.

      The cost of living is rising and I’m afraid the government is being a lot less than honest about just to what extent.

      We’ve had our period of prosperity. I hope you all enjoyed it.

      • JT

        Tyler, you’re correct. If my wife returns to work, it will be solely to maintain her skill set in a fast changing sector, with a view to picking her career up in earnest in years to come. That is an incentive of sorts, but it’s not hugely compelling.

        I do think the tax shortfall argument is very short-sighted though. We are told we must work harder for longer in order to fund our own retirement. I agree. But on this basis women should be given better incentives to pursue a career if they wish, in parallel with parenting.

  • GFL

    The life style choice is not between earning 4k more or less by her working. It’s the choice between having a baby and reducing your standard of living or not having baby and having loads of spare cash.

    And if your only 4k better off with her working she cannot be earning more than double the average wage!

    • JT

      No. This isn’t a lifestyle choice because whether my wife returns to work or not would make absolutely no difference to our standard of living.

      I can assure you that £4k per annum is the correct figure. It’s a simple calculation – you just deduct nursery fees, travel and incidentals from net salary.

      • GFL

        It absolutely is a choice, here are your options:

        Option 1 – Kids + financial sacrifice
        Option 2 – No kids + no financial sacrifice

        What is so hard to understand?

        • GFL

          And the 4k figure cannot be correct – someone making 60k is taking home around 41k a year. Where is your wife commuting from? Paris?

          And don’t include lunch and formal office wear in your calculations, because we all have to pay that whether we have kids or not!

          • JT

            Evidently you know my circumstances better than I do, then.

        • JT

          My income is such that we haven’t had to make any financial sacrifices now that my wife isn’t working. You are simply making unfounded assumptions.

  • Realist

    This old adage always comes up that ‘other peoples children will look after them in their old age’. This has nothing to do with it, if you have paid into the system all your working life, then you have paid your dues in order to be ‘looked after’ and has nothing to do with paying ‘extra’ for somebody else’s children.

    • Ellen12

      We are in the middle of a debt crisis that has been accumulated over decades. There is nothing ‘paid into’ the system. QE is your debt being passed onto the young and the system is broke. The young and unborn owe you nothing. Why do you feel so entitled to their labour and taxes …. maybe it;s your typical modern mindset of entitlement.

      • Realist

        I realise that the way the system works, that the monies paid over the course of the working life is not invested for for the future, but the fact is, they have paid their dues over that time and that is why they are entitled to be looked after. The fact that the government has made the Country broke is not the fault of the hard worker who has paid in all his life.
        QE isn’t my debt, I’ve never had any debt, so as the young and unborn shouldn’t pay for, why should I.

        • Ellen12

          QE is your debt. It is the debt of everyone in the country and selling £325 billion government bonds to the Bank of England to be paid back at some time in the future is because of the ‘entitlement’ issues of the current and previous generations. And to put things entirely in perspective, it would not have been possible to bail out the country at all without the promise of ‘other peoples children’ OR confiscation of assets of the current generation – that means your assets too.

          • Boris MacDonut

            Ellen QE is not debt it a book-keeping adjustment franked by itself.

          • Realist

            As a Country as a whole, then yes QE is everyone’s debt, but the young are also part of the system, so they have to play their part as well.
            I have never borrowed any money or had any debt and have paid tax and NI for countless years, so my ‘entitlement’ is not the same as all the people, including the government and banks who are heavily in debt and caused this problem.

            • Ellen12

              Nobody under the age of 18 has responsibility for who is mismanaging our economy today. They are not represented through the democratic system at all. You are. And even though politicians, such as Nick Clegg, lie to get into power, it was todays generation of adults that voted them in. The young have been excluded from the decision making part of the system. We would have very different policies if their interests were represented as vigorously as older peoples interests.

              • Realist

                They are not directly responsible, but their parents are voting for their future and wellbeing, so they do have an influence.
                I have never voted for the three main parties, so you could say that I am not responsible for the state of the present Country, regardless of the democratic system

        • Tyler Durden

          Tough I’m afraid, the money is gone. If people have ‘paid their dues’ then I’m afraid they should have looked more carefully at who was in power and how things were being run.

    • Tyler Durden

      I’m afraid if you think you’re paying into a ‘system’ that will come back and look after you then you’re seriously deluded. You tax and national insurance is received and then spent. You only need to look at our ludicrous national debt to see that one.

      The only way you can ‘save’ is by yourself, out of the financial system.

      • Realist

        I didn’t say that the ‘system’ will look after you in old age. I said that if you have paid into the system all your life, then there is no need to feel guilty about the young and unborn paying for your old age.

        • Ellen12

          So, there is no society when it comes to dealing with parents. They had them so they should pay for them. BUT, you want to swing out of the childrens future for your healthcare and old age! The big Society, when you want to take instead of contribute. A bit of a one way street, don’t you think? You really need to address you sense of entitlement issues.

          • Realist

            That is just it, I have contributed all my life and the takers (benefit scroungers, parents who have children for benefits and housing and people in debt who have been bailed out, etc etc) have ruined it for the rest of us. Now, I am quite happy not to have my ‘entitlement’ if I never have to pay into the ‘system’. I’ll take my tax,NI and just look after myself, which I’d rather do anyway.

        • Tyler Durden

          “…then there is no need to feel guilty about the young and unborn paying for your old age.”

          I’m afraid there is because they won’t be there to pay for you. Unless you’ve paid for yourself through your lifetime and been clever enough to save properly and preserve your wealth then the future is incredibly bleak for you.

          Bleating on about having paid your dues will not make a blind bit of difference.

          • Realist

            Don’t worry, I have investments for my future, as I realise that the government won’t do it. I’m just stating that if you have paid in all your life, you SHOULD be entitled for care in your old age. Otherwise why should I bother paying into the ‘system’ for somebody else to reap the benefits.

  • Realist

    GFL, you are correct and is typical of the modern day mindset. People want everything and they think it is perfectly acceptable to carry on their ‘perfect lives’ while having children and expect others to pick up the bill.

  • New Home Expert

    “domestic staff are the only staff paid out of anyone’s post tax rather than pre-tax earnings” This is absolute rubbish! Everytime you spend money it is post tax income that is being spent. Everything you spend it on has been created by paying staff wages. The garage service for your car, you are paying the mechanic from post tax income. The checkout at Tesco? post tax income again.

    If women want children they should stay at home and look after them and not expect the state to give tax relief for their nannies.
    What next? paying for window cleaners and gardeners with pre-tax income?

  • Boris MacDonut

    Merryn envisages the nanny on a tpical £560 a week. But fails to mention she does the maths as if said nanny takes home £560 a week net. It should of course be gross. £560 a week is £14 an hou for a 40 hour week or £29,000pa. Thios would cost the mum (and dad) £32,700 not nearly £43,000. If the erstwhile career woman wants to pay her nannay so handsomely thats he takes home £560 a week (£2,500 a month) then the ambitiouis couple need to ofer a job at nearer £20 an hour or £40,000plus.
    Merryn talks again about London almost as if it is typical.It is not. Allowing nanny costs tax free would be abused nationwide. For instance by young mums on say £25,000 a year employing their mum as a nanny on the same rate,to get their whole salary tax free.
    To prevent abuse it would have to be limited to the very well off making an even bigger mockery of the whole idea.

  • cassie

    I am a childminder and have been for over 10 years. My fees vary from £3-£5 per hour depending on hours required. Average fees are £6k per year. My fees have not increased since I started childminding but my expenses have gone up.
    I offer funded sessions for 2, 3 and 4 year olds, my income goes down by £889 per year for every funded 2 yr old when they reach 3 and access 3 yr old funding.
    Where does the figure of 19% increase come from? I can only earn more money by stretching myself and looking after more children, not by putting up fees to parents.

    As for suggesting that childcare should be an allowable expense for parents, I wholeheartedly agree. In order for parents to work, they need childcare.

    1. after their costs, they will still have some earnings which will be taxed – so the taxman benefits

    2. the childcarer / nursery will have an income, this will then be taxed – so the taxman benefits

    3. allowing the parents to pay the childcarer through their payroll so that they don’t get taxed on childcare means that all childcarers will have to declare all their income – again the taxman benefits

    The way the current system seems to work is that the parents earn their wages which gets taxed, they then pay me, I declare it to the taxman and it gets taxed AGAIN.

    • GFL

      You can apply the same silly logic to any cost out of gross pay – If I can buy beer out of gross pay the pub benefits, since the pub will be taxed the tax man benefits and since the pub needs more staff to keep up with demand it employs more people.

      Why are school fees and private health insurance not allowed out of gross pay? This would mean more people paying for their own cover and less strain on an overstretched system!

      In fact give me an example of an expense where I can’t use this logic?

      • Ellen12

        That is not ‘the same silly logic’. You spent you money on beer, a consumable item, or end user purchase. Cassie rightly pointed out that the same money is being taxed twice without ever being spent, once out of the pay of the working parent and then out of the pay of the childcare worker.
        Imagine how much consumables would cost if you applied the same methodology to VAT, allowing nobody reclaim it down the chain while insisting the next person in the chain paid more VAT on the same item.

        • GFL

          When you buy a consumable product part of the cost is the labour of the worker in the pub/shop/restaurant. But even with that aside, what about the cost of mechanic or gardener or painter or hair stylist or plumber?

          In fact any profession where the value added is by the individual rather than the product they are selling.

          As Boris alluded to above if you allow big tax deductions for these types of expenses it would be bordering impossible to stop wide spread abuse!

          • Ellen12

            There are many things that are tax deductible and what they all have in common are that they are business or work related expenses. Business claim these expenses through their company account and individuals do so through their tax code. Please explain why you think other work related expenditure should be tax deductible and childcare should not be. What elements make childcare different to, say, mileage costs or office cleaning costs.

  • Boris MacDonut

    To heklp people understand reality here. In 2010 nannylink said the average Uk nanny wage was £25,800 (has it really risen 68% in three years?). Even in London typical rates were only £8 an hour but some work up to 60 hours aweek. The usual pay was £380 a week even in London.
    There are 110,000 nannies working in the UK.That is just one in every 237 households.They look after fewer than 250,000 of the UK’s 15million children.That is a very priviliged 1.7%. Do we really want to subsidise the richest 2% of parents just because one or two may be the next James Dyson?

  • Bayard

    Dear Merryn,
    If one parent decides to stay at home to look after the children, their costs are borne by the other parent. This is the cost of childcare for that couple. If both parents decide to work, then their childcare costs may increase, but it is not reasonable to expect that the the increased costs of childcare are then borne entirely by the one returning to work. Your calculations above should include the saving to the breadwinner of not having to support a non-working spouse.
    If you are going to work on the basis of the couple’s joint income (which you don’t), then it doesn’t matter who pays the childcare costs, it all comes out of the same pot, but should you not then include as a cost of having a non-working parent, the opportunity cost to the joint income of the salary forgone?

  • mr clyde

    GFL – I admire your fortitude, I gave up.

  • GFL

    Ellen you are making 2 separate arguments here and you are yo-yoing between them inconsistently and randomly depending on who you are responding to.
    Argument number 1 – Income should not be taxed twice. This is obviously nonsense since there is little difference between a consumable product (which btw includes labour) and a service, for example hair dresser, Gardner, Solicitor, etc which is taxed twice. I would be happy for the government to stop income being taxed twice (like VAT), as long as it’s done across the board. But just for a nanny and nothing else is laughable!

    Argument number 2 – Nanny is somehow a business expense that all the other services are not. This too is ridiculous. All a nanny does is buy you time, just like many other services. The question you have to ask yourself is your time (taxed) worth more than the service provider’s time untaxed? You could make the argument specialist services actually have more of a case to be paid out of gross salary since you can’t do them yourself, so you are buying more than time. Looking after a sick relative is just as time consuming and probably has a bigger burden on ones career (but that is off topic).

    I would be happy for ALL expenses that may hinder someone’s career to paid out of gross pay, but only if it’s across the board. I would happily write of my suits, lunches, travel, mechanic cost. In fact if I could pay people out of gross pay I would seriously consider getting a chef, just imagine how productive I would be if I didn’t have to cook! If I didn’t have to iron my own shirts or clean the house I could spend that time starting a business – that’s how silly this whole article is.

    And without sounding like captain obvious, spending time with your kids should be a blessing! No one is forcing you to have them!!!!!!

    • Ellen12

      I have remained consistent throughout. My argument is simple. Unlike your ridiculous analogy of claiming a chef to cook your meals because it would make you more productive in your work, childcare is an expense that is crucial to being available to work at all. I challenged you to justify how anything could be regarded as tax deductible if childcare is not – and you managed to sidestep my question by invalidating my argument and conveniently accusing me of being a crazy woman who yo yos about incoherently. Not sure if that is a sexist thing of yours!!! But you still have not given a single justification to any allowable expenditure being tax deductible using the same simple criteria that it is a necessary expense in order to enable people to be available to work.

      Cassie, the childminder above, made the very legitimate observation that money paid for childcare is taxed twice, once against the parent’s pay and then the childminder/ nannys, something of a anomaly in the tax system. This is a view I agreed with her on but I expect you to harp on about your new haircut or new shoes or some other consumable end product as comparable. The policy of not allowing childcare costs be tax deductible is most likely keeping a great deal of parents out of work, or limiting the types of work they are available for. And then the government follow up on that one by penalising parents who stay at home through the tax system (ie. child benefit and unused tax free allowance). You are possibly an over indulged person who has no idea what younger families are up against in the current climate of anti family neo liberal politics.

  • Realist

    Instead of arguing about should a nanny be tax free, why don’t they tackle the root of the problem as to why they need a need or can’t afford a nanny, that is high house prices. House prices are based on two incomes, so that doesn’t give the parents a choice as to whether they can stay at home and look after the children.
    Lower house prices would also help more spending on the high street, service industries and many other sectors, thus helping the economy, instead of the bankers.