UK chancellor urged to remove £100k childcare ‘cliff edge’ prompting parents to cut work hours
Critics say threshold pushes higher-paid staff to cut back on work and often mothers to stop working to avoid losing entitlement John Healey has been urged to fix the £100,000 childcare “cliff edge”, that means some higher-paid employees cut back on work to avoid losing their entitlement. Since the latest expansion of taxpayer-funded childcare in 2024, families with young children in which both…
The UK Chancellor, John Healey, has been urged to address the £100,000 childcare "cliff edge" that has prompted some high-earning parents to reduce their working hours or even stop working altogether. This issue arose following the expansion of taxpayer-funded childcare in 2024, which allows families with young children in which both parents earn less than £100,000 a year to receive 30 hours of free care per week, or none at all if one of them crosses that threshold.
A report by the Centre for Tax Reform (CenTax) highlights that by the end of the current parliament in 2030, the average parent crossing this "cliff edge" may need to earn £124,000 to avoid losing their free childcare entitlement. CenTax director Arun Advani noted that the "bunching" of incomes just below the threshold suggests that around 1,000 families were artificially suppressing their earnings in 2022 to avoid the threshold, and this number could rise to almost 12,000 by the end of the parliament.
The report also indicates that the policy may be causing some mothers to drop out of work. Currently, 6% of lower-paid partners, usually the mother, are not working, but this rises to 9% above the £100,000 threshold. CenTax criticizes the fact that the threshold is based on expected income for the year ahead, which may lead some families to claim entitlement even if they eventually earn more than £100,000.
The thinktank proposes several potential solutions, such as restricting free childcare to 15 hours for families above the £100,000 threshold or gradually tapering away the entitlement at 28p for each £1 earned above the limit.
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