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Seeking comment: families losing childcare support as £100k income threshold loses value

Journalist: Aaliyah Ahmed, The Times

ended 05. August 2026

I am working on a money story looking at how the number of families caught by the £100,000 childcare support income threshold has risen sharply, with concerns that the limit has not kept pace with wage growth and inflation.

The story will explore how £100,000 was once considered a high-income salary, but rising earnings and living costs mean more families are now being caught by a threshold that has remained frozen.

I would like to speak to financial advisers, tax specialists or childcare experts who can provide insight on:

  • How the frozen £100,000 threshold is affecting working families today.
  • Whether more clients are finding themselves caught by this “cliff edge” after a pay rise, promotion or bonus.
  • The financial impact of losing funded childcare support alongside other tax consequences, such as the personal allowance taper.
  • Whether the rules still reflect what is considered a high income in today’s economy.
  • Any examples of families having to rethink career decisions, bonuses, pension contributions or working patterns because of the threshold.

I am looking for expert commentary on why this issue is becoming more significant, what options families have, and whether the current system is creating unintended financial penalties for households earning around this level.

5 responses from the Newspage community

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Editor
Chris Barry
Director at Thomas Legal
The entire process is confusing, unfair and impossible to navigate.

Once you earn over 100k you enter an effective 60% tax rate whilst losing 100% of the government free childcare hours, in addition to losing the 20% top up in the childcare funding account.

When a child reaches 3 years of age, everyone is entitled to 30 free hours but those above this threshold are only entitled to 15 free hours.

The free hours are only available in term time and not many people in full time employment are entitled to 12 weeks annual leave meaning the 30 or 15 free hours are spread over the entire year, leaving quite a significant reduction in the advertised free rate.

High earners need to earn over 150k to stand still, I.e. those earning 99k and those earning 149k take home the same money after childcare and tax.

Those earning between 100k and 150k look to salary sacrifice into pensions and other benefits but the government is capping this by next year.
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Graham Nicoll
Financial Planner, Chartered FCSI at NCL Wealth Partners
The frozen £100,000 adjusted net income threshold is confusing and increasingly distorting behaviour. I am seeing people assess promotions, career moves and even whether to accept a pay rise because earning slightly more can trigger the sudden loss of childcare support, while also beginning the personal allowance taper.

For some families, the combined impact means extra responsibility leaves them little, or no better off.

Planning can include pension contributions or salary sacrifice to reduce adjusted net income. Business owners may also consider the timing of bonuses or dividends, while charitable gifts can help. However, these decisions must make wider financial sense, not simply avoid a threshold. A system designed to support working parents should not create an artificial cliff edge that discourages career progression. This is combined with frozen tax thresholds also impacting all individuals in the UK.
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Paul Denley
CEO at Oakham Wealth Management
£100,000 was set as the line for high earners over a decade ago and hasn't moved since, while wages and prices have. That's fiscal drag doing its quiet work. The cruelty is the cliff edge: earn £99,999 and you keep your funded childcare; earn £1 more and it vanishes, just as the personal allowance taper begins. In some cases, the combined effect can leave families worse off after a modest pay rise or bonus. We increasingly see clients boosting pension contributions simply to stay below the threshold: sensible for retirement, but a bizarre incentive for the economy. A threshold frozen while everything around it rises no longer identifies the highest earners; it increasingly penalises aspiration.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
This is a problem faced by more and more. The cliff edge loss of tax free childcare and hours can actually mean that taking income over £100k can leave those families worse off.

Every family situation is different so a calculation should be done to look at the impact and decide if it makes sense to make a bigger pension contribution or request more holiday time off in lieu of the cash for example.
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Harvey Dhillon
Founder & CEO at Zmartly
Three things get missed. Incomes are never added together, so two working parents on £99,000 each, £198,000 between them, keep everything that one parent on £101,000 loses for the whole family. The threshold does not find high-income households. It finds households with one high earner.

Second, salary sacrifice is not about to be capped. From April 2029 only the first £2,000 a year escapes National Insurance. Income Tax relief is untouched, so it still brings adjusted net income under £100,000 and still protects the childcare.

Third, the damage is not the taper. Losing the personal allowance costs 60p in the pound, so tax alone never leaves anyone worse off. The childcare does, because that is a cliff. On the government's own funding rates, a family in England with a 2 year old and a 3 year old loses roughly £17,900 of support for £1 of extra income, while a rise from £99,000 to £101,000 leaves only about £960 more in the pocket. That is why people turn down promotions.