Parents Skirting £100k Income Limit for Free Childcare Could Surge
Tax analysts warn that nearly 12,000 parents may be keeping their earnings just below £100,000 to retain free childcare, a sharp rise from 2022.
Centax researchers project that the number of parents positioning their salaries just below the £100,000 free-childcare threshold could reach almost 12,000, a jump of nearly 11,000 since 2022. The scheme, introduced by former Chancellor Jeremy Hunt in March 2023, offers 30 hours of weekly childcare to families earning under £100,000 and costs the Treasury about £5 billion annually. Analysts found that roughly one-third of those earning between £100,000 and £120,000 are still qualifying by declaring projected net income below the limit.
Centax recommends switching to actual earnings or lifting the ceiling to £111,000, which would not increase fiscal outlays. Removing the threshold entirely would add about £640 million by 2030 but would end the “tax trap” that penalises high earners with a steep effective tax rate. Arun Advani and Jack Pepin-Hall argue the current cliff-edge is unsustainable and call for reforms to make the system fairer for higher-income households.
