The childcare cliff · UK · 2026
The £100k childcare cliff: when earning more makes you poorer
How bad is the £100k childcare cliff for me?
Everyone's heard of the 60% tax trap above £100,000. Almost nobody talks about what happens to parents. Cross £100,000 of adjusted net income by a single pound and you lose your free childcare hours and Tax-Free Childcare — not gradually, but all at once. Stacked on the 60% tax band, this can push your real marginal rate over 500%: you can be thousands of pounds worse off for earning more. This tool works out your exact number.
Verified 12 August 2026
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Information, not financial advice. The value of free hours is an estimate based on your area's funded rate × your entitlement × 38 term-time weeks; your actual saving depends on your provider and how many hours you use. Tax-Free Childcare is worth up to £2,000 per child a year (£4,000 if disabled). Adjusted net income is your income after pension contributions and Gift Aid. Verified 12 August 2026. How we calculate.
Why this happens
The UK's childcare support — 15 and 30 funded hours, and Tax-Free Childcare — all share one eligibility rule: neither parent can have an adjusted net income over £100,000. Unlike income tax, which tapers, this is a hard cliff. At £99,999 you keep everything; at £100,001 you lose all of it, for the whole family, backdated to the end of the term in some cases.
On its own, that would be painful. But it lands on top of the personal-allowance taper, which already creates a 60% marginal tax rate between £100,000 and £125,140. Add the lost childcare — which for two children in a high-cost area can be worth £30,000 a year — and the maths becomes genuinely absurd: for a stretch of income just above £100,000, every extra pound you earn can cost you several pounds once lost support is counted. Economists call this an effective marginal rate over 100%; parents call it working for free, or worse.
What you can do about it
The fix is almost always the same: bring your adjusted net income back under £100,000, usually with a pension contribution (via salary sacrifice or personally) or a Gift Aid donation. Because the cliff is so steep, the numbers are lopsided in your favour — a pension contribution that costs you a few thousand in take-home can preserve tens of thousands in childcare and allowance. Our tax optimiser and reverse salary solver both handle this. The one thing not to do is nothing: sailing £3,000 over £100,000 with two young children is one of the most expensive mistakes in the UK tax system.