Business Personal Finance

Sunday 22 April 2018

Your financial questions answered

Should I work or stay home?

Young children cost a lot in childcare
Young children cost a lot in childcare

John Lowe

Q My husband and I have four young children. We both work full-time – and enjoy our jobs. However, the cost of childcare means it would make more financial sense for one of us to stay at home and look after the children.

Apart from the loss of one salary, what would be the other financial consequences of one of us giving up our job?

Sandra, Raheny, Dublin

A Raising children is the greatest experience of all but it is also expensive – childcare can cost up to €15,000 per annum per child with a full-time creche place costing from €715 to €1,260 per month per child. This is also a net cost.

The higher-rate taxpayer would have to earn at least double the cost to meet the monthly childcare bill. And wait until your child finishes second-level – recent research found that the total cost of third-level education per child exceeded €42,000! So can you afford to give up and not save for third level?

The decision to work or stay at home very much depends on your circumstances. If one partner is on the lower rate of tax where the other partner can avail of unused allowances and credits, it might make sense for that person to mind the children – that's if sanity allows of course. Professional careers are also easier to rejoin than finding a job, so discarding your employment requires careful consideration.

Most importantly, you would need to plan it all out – and complete a proper budget is a must. Taking one salary away and adjusting any tax advantage with the other income is just the first part of it. Do you have two cars? Do you need two? What costs will increase and what will decrease?

While you can offset child benefit against loss of income, you could argue you were receiving that anyway. Another option is that you could mind three more children and earn up to €15,000 per annum tax free. That may not be your cup of tea, but you do have options.

Q I'm on the road a lot with my job. I approached my boss recently to see if I could arrange a company car and was offered two choices – a company car to myself or the use of cars from the company's car pool. Which of these options would work out better for me financially?

Terry, Athlone

A With pooled cars, you don't have to pay benefit-in-kind tax – however, a company car can be taxed annually at up to 30 per cent of the original market value – hence your dilemma.

However, having your own individual company car has advantages.

First of all, as you seem to be on the road a lot, the benefit-in-kind tax may not be so onerous as you can offset your high mileage against the tax – as well as the fact that you are out of the office at least 70 per cent of the time.

Secondly, with a pooled car, you still need your own transport for personal mileage whereas a company car is yours to keep on or off the job.

Thirdly, with a company car, your annual road tax, insurance and servicing is paid for by the company – plus the fuel of course. The same applies to a pooled car but not so your personal transport.

Sharing a car with others could also be hazardous to your health as well as inconvenient geographically. My choice? I would take the company car every time.

You could of course reject both options and ask for a mileage allowance instead on your own personal car.

Sunday Independent

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