One expert said: 'Due to the warped rules, this £2,000 pay rise ends up costing them nearly £10,000, an effective tax rate of almost 500pc'
Critics have slammed a "warped" decision by HMRC that could see parents miss out on £20,000 each. The previous Conservative government introduced measures on September 1 offering 15 hours of free weekly childcare. However, under HMRC rules, families with one parent earning in excess of £100,000 will not qualify for this benefit.
Charlene Young, a savings specialist at AJ Bell, has highlighted concerns, saying: "Whilst many working parents will welcome the latest extension of funded childcare hours, a distortion in the tax system means that the cliff-edge for high earning parents will worsen." Ms Young issued a warning to individuals who had received pay rises, stating that it could ultimately cost them "£10,000". She explained that due to the distorted rules, a £2,000 pay rise would result in a nearly £10,000 cost, equivalent to an effective tax rate of almost 500%.
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