UK Chancellor urged to address £100k childcare cliff edge

The Centre for Tax Reform (CenTax) has urged UK Chancellor John Healey to address a £100,000 childcare ‘cliff edge’ that is causing some higher-paid employees to reduce their working hours. Under current rules expanded in 2024, families where both parents earn less than £100,000 per year can receive 30 hours of taxpayer-funded childcare per week, but this entitlement is lost entirely if one parent exceeds the threshold.

Researchers from the Warwick University-based thinktank report that this policy may be incentivizing mothers to leave the workforce. Data shows that while 6% of lower-paid partners are out of work below the threshold, that figure rises to 9% once a partner's income exceeds £100,000.

CenTax analysts predict that by 2030, the average parent crossing this threshold would need to earn £124,000 to remain financially better off after losing childcare benefits. The report noted that in 2022, approximately 1,000 families were already artificially suppressing their earnings to stay below the limit, a figure that could rise to nearly 12,000 by the end of the current parliament.