UK chancellor urged to replace abrupt £100,000 childcare eligibility cutoff

Pressure ahead of the October budget

UK Chancellor John Healey is facing calls to reform the £100,000 income ceiling for taxpayer-funded childcare before his first budget on October 28. Under the current rules, a family can receive 30 hours of funded care each week when both parents meet the work test and remain below the individual income limit, but can lose the working-parent entitlement when either adult crosses it.

The Centre for Tax Reform argues that this abrupt cutoff changes work decisions because a modest pay rise can trigger the loss of childcare worth substantially more than the additional salary. Its analysis, reported by the Guardian, estimates that an average parent crossing the threshold in 2030 would need to earn about £124,000 to avoid being financially worse off after losing the entitlement.

Researchers identified clustering of declared incomes immediately below £100,000, which they interpret as evidence that about 1,000 families were already suppressing earnings in 2022. They project that the number could approach 12,000 by the end of the parliament. Those projections are modelling results, not an official government forecast, and depend on the policy remaining unchanged.

How the present rule works

Official government guidance confirms that eligibility is assessed individually rather than on combined household income. Parents generally must each meet a minimum earnings test, while neither may expect adjusted net income above £100,000. The entitlement covers children from nine months old to compulsory school age and normally provides 30 hours a week for 38 weeks of the year.

The analysis also points to a possible gender effect. The share of lower-paid partners outside work reportedly rises from 6 percent below the threshold to 9 percent above it; the lower-paid partner is usually the mother. The researchers interpret that discontinuity as evidence that losing childcare support may encourage some families to reduce one parent’s employment.

Two alternatives were proposed. Allowing families over the ceiling to retain 15 hours would cost an estimated £210 million by 2030. A second option would taper support at 28 pence for each additional pound earned above the threshold; the researchers calculate that approach could be revenue-neutral while removing the immediate cliff edge.

No policy change has been announced. The key next step is whether the Treasury addresses the cutoff in the October budget, commissions further analysis or leaves the existing eligibility test intact. The decision would affect labour supply, household finances and public spending, making it a consequential economic-policy issue rather than a lifestyle story.