The £100k childcare cliff: what you lose and how to keep it
Earn £1 over £100,000 and a family with a child under 3 can lose £10,550 a year of Tax-Free Childcare and funded nursery hours. Here is what is at stake at each age, why a pay rise has to reach £127,100 to make up for it, and how a pension contribution keeps the support.
By Clearer Money teamPublished 6 min read
Examples assume one earner in England, salary only, no pension, children aged 9 months to 2, full Tax-Free Childcare used and funded hours valued at £7.50 an hour. Tax year 2026-27.
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Every money check worth doing this tax year, in one list: tax and take-home, pensions, savings, childcare and the dates that matter.
What you lose at £100,000
Two kinds of help for working parents share the same upper income test. If either parent expects adjusted net income over £100,000 for the tax year, the household loses both:
- Tax-Free Childcare. For every £8 you pay into a childcare account, the government adds £2, up to £2,000 a year for each child (£4,000 if the child is disabled). Children qualify up to age 11, or 16 if disabled.
- Working-parent funded hours (England). 30 hours a week for 38 weeks of the year, 1,140 hours in all, from 9 months old until school. At £7.50 an hour that is worth £8,550 a year per child, though what it saves you depends on your nursery's fees.
What is at stake depends on your children's ages, because 3- and 4-year-olds keep England's universal 15 hours whatever you earn, and school-age children only ever had Tax-Free Childcare.
| Child's age | Tax-Free Childcare | Funded hours | Lost a year |
|---|---|---|---|
| 9 months to 2 | £2,000 | £8,550 | £10,550 |
| 3 and 4 | £2,000 | £4,275 | £6,275 |
| School age to 11 | £2,000 | — | £2,000 |
The figures are per child, so two children under 3 put £21,100 a year on the line.
What £1 over costs
The tax trap above £100,000 is a slope: each extra £1,000 is taxed at 60%. The childcare test is a cliff. At £100,000 you qualify; at £100,001 you don't, and nothing tapers in between.
| A year, one child under 3 | £100,000 salary | £100,001 salary |
|---|---|---|
| Take-home pay | £68,557 | £68,558 |
| Tax-Free Childcare | £2,000 | £0 |
| Funded hours (value) | £8,550 | £0 |
| What the household keeps | £79,107 | £68,558 |
£1 more salary, £10,550 less childcare support
The household also pays the full Child Benefit charge at both salaries, so it cancels out of the comparison.
Get the free 2026-27 Money Check-up
Every money check worth doing this tax year, in one list: tax and take-home, pensions, savings, childcare and the dates that matter.
The pay rise you'd need to make up for it
Because the loss lands all at once and every pound above £100,000 is taxed at 60% or more, it takes a big rise to get back to where you were. With one child under 3, the household only keeps as much as it did at £100,000 once salary reaches £127,100. With two, it is £147,000.
| Salary | Take-home pay | Childcare support | Household keeps |
|---|---|---|---|
| £95,000 | £65,657 | £10,550 | £76,207 |
| £100,000 | £68,557 | £10,550 | £79,107 |
| £100,001 | £68,558 | £0 | £68,558 |
| £105,000 | £70,457 | £0 | £70,457 |
| £110,000 | £72,357 | £0 | £72,357 |
| £120,000 | £76,157 | £0 | £76,157 |
| £127,100 | £79,149 | £0 | £79,149 |
| £130,000 | £80,686 | £0 | £80,686 |
So a job offer of £110,000 against a current £100,000 can leave a young family £6,750 a year worse off. The pay rise calculator runs that comparison for your own offer.
Keeping it with a pension contribution
The test is on adjusted net income, not salary, and pension contributions reduce it. On a £110,000 salary, £10,000 of salary sacrifice (£833 a month) brings adjusted net income back to £100,000.
What sacrificing £10,000 does on £110,000, one child under 3
- Childcare support kept£10,550(51%)
- Into the pension£10,000(49%)
Take-home pay falls by £3,800, because £6,200 of the £10,000 would have gone in tax and NI anyway. In return the household keeps £10,550 of childcare support and has £10,000 more in the pension: £16,750 better off overall, counting the pension. The pension is money for retirement, not cash you can spend now, so check the lower take-home still covers the nursery bills.
Salary sacrifice needs your employer to offer it. A personal pension works too: you pay £8,000 and the provider claims basic-rate relief to make it £10,000 gross, which reduces adjusted net income by the same amount. It doesn't save National Insurance, and higher-rate relief is claimed through Self Assessment.
The rules that catch people out
- It's each parent, not the household. One parent just over £100,000 ends the support for the family, however little the other earns.
- It's adjusted net income, not salary. Bonuses, taxable benefits such as private medical insurance or a company car, and savings interest all count. A £98,000 salary can be over the limit. Work out yours.
- It's what you expect to earn this tax year. You reconfirm every 3 months. If a bonus or pay rise changes what you expect, a pension contribution before 5 April can bring the year's figure back under.
- The funded hours are England's. Tax-Free Childcare is UK-wide; Scotland, Wales and Northern Ireland have their own funded childcare schemes.
- You still need to earn enough. Each parent must also expect to earn at least the equivalent of 16 hours a week at the National Minimum or Living Wage over the next 3 months.
Already over the limit this tax year? The went-over calculator works out the top-up that brings you back under before 5 April.
