What a pay rise above £100,000 now costs UK parents in childcare
Key Points
- Up to 99,000 children missed out on funded childcare in 2025/26 because one parent earned above £100,000
- The support those families could not claim was worth as much as £874 million
- The limit applies to each parent separately and removes the entitlement in full, with no taper
- Income above £100,000 also triggers the personal allowance taper and an effective 60% tax rate to £125,140
- The threshold has been frozen since 2017
Up to 99,000 children missed out on funded childcare worth as much as £874 million in 2025/26 because one parent earned more than £100,000, according to Department for Education figures that Quilter obtained under the Freedom of Information Act.
The working parents entitlement gives eligible families up to 30 funded childcare hours a week for children aged nine months to four years.
Eligibility rests on adjusted net income rather than headline salary, and the test applies to each parent separately rather than to household income. A family loses the entitlement outright if either parent goes above £100,000, with no taper and no partial award. A single pound over the line ends the support for that household.
The Department for Education estimates that between 50,500 and 99,000 children were affected by the limit in 2025/26, with the value of the support their families could not claim ranging from £446 million to £874 million.
It presents the figures as ranges to reflect uncertainty over household eligibility and whether both parents work. The values assume families take up the full entitlement.
| Year | Children affected | Value of support unavailable |
|---|---|---|
| 2018/19 | 10,900 – 22,500 | £41 million – £84 million |
| 2019/20 | 11,800 – 23,400 | £44 million – £88 million |
| 2020/21 | 12,300 – 24,300 | £46 million – £91 million |
| 2021/22 | 13,800 – 27,100 | £52 million – £101 million |
| 2022/23 | 15,500 – 28,900 | £55 million – £108 million |
| 2023/24 | 15,600 – 30,800 | £58 million – £115 million |
| 2024/25 | 46,400 – 91,300 | £239 million – £469 million |
| 2025/26 | 50,500 – 99,000 | £446 million – £874 million |
Source: Department for Education estimates obtained by Quilter through a Freedom of Information request
The jump from 2023/24 partly reflects the expansion of the scheme rather than the threshold alone. When the series begins in 2018/19, working parents of three and four-year-olds could access 15 additional funded hours a week.
By 2024/25 the government had extended funded childcare to eligible children aged nine months to two years, and by 2025/26 those children could access up to 30 funded hours. The figures therefore cover both a larger eligible population and a more generous offer.
The expansion also raises the stakes for families who cross the line, because the entitlement they forfeit is now worth considerably more than it was when the restriction came in.
The childcare limit sits alongside a second threshold at the same point. Income above £100,000 reduces the personal allowance, producing an effective tax rate of 60% on earnings between £100,000 and £125,140.
A parent whose pay rise, promotion or bonus takes them over £100,000 can face the higher marginal rate and the loss of childcare support in the same tax year.
How families can stay under the limit
Because the test uses adjusted net income rather than salary, Quilter said parents close to the line may be able to stay below £100,000 by increasing pension contributions, using salary sacrifice arrangements where an employer offers them, reviewing the effect of bonuses and other taxable benefits, and monitoring adjusted net income across the tax year.
“The childcare income limit creates one of the sharpest financial cliff edges in the system,” said Ian Futcher, financial planner at Quilter.
“If a parent’s adjusted net income exceeds £100,000, their family loses eligibility for the working parents’ childcare entitlement entirely. In practice, that can mean a pay rise, promotion or bonus unexpectedly results in the loss of support worth thousands of pounds.”
“Eligibility is based on adjusted net income, so pension contributions can be particularly effective,” he added. “Not only can they help improve long-term retirement outcomes, but they may also help preserve access to valuable childcare support and other tax allowances.”
The threshold has not moved since its introduction in 2017. The government has said it will keep the childcare thresholds under review.
