How to calculate if we're better off both working or not

Captain Average

Hi folks,
My wife and I are currently trying to decide whether we'll be better off next year when she's due to return to work, if one of us should give up the day job.

How do we calculate how much we'd make on a solo income?

We both earn approx 40K a year currently.
Our childcare is going to cost us 14.5K

I just don't understand our tax system at all and can't figure out my own tax, not to mind how sharing tax credits would work.
Assuming we reduce down to one 40K salary, how much tax would we pay a year?

gerrybbadd

Captain Average wrote: »

Hi folks,
My wife and I are currently trying to decide whether we'll be better off next year when she's due to return to work, if one of us should give up the day job.

How do we calculate how much we'd make on a solo income?

We both earn approx 40K a year currently.
Our childcare is going to cost us 14.5K

I just don't understand our tax system at all and can't figure out my own tax, not to mind how sharing tax credits would work.
Assuming we reduce down to one 40K salary, how much tax would we pay a year?

Look in the stickies at the top of the thread, and throughout this forum also - multiple calculators you can use to figure this out

namenotavailablE

My Excel spreadsheet is at taxcalc.eu/monthlyss. Uses macros and requires Excel 2010 or higher, Windows platform.

loyatemu

I'd be surprised if you'd be better off if both your incomes are about the same. If her income was a lot lower than yours it might be worth her giving up work.

Your current joint net income should be about 63K. Even if you paid no tax on your own income the maximum you'd take home is 40K, so if childcare is 14.5K then you'd be 8.5K worse off, but you will pay tax so it will be substantially worse than that. You can factor in other stuff like travel costs etc but I can't see how it would be worth your while (financially at least).

Captain Average

Thanks for the replies everyone. Much appreciated