The £100k childcare cliff (England) — Family Money Expert

Childcare · England

The £100k childcare cliff (England)

One pound of adjusted net income over £100,000 and you lose Tax-Free Childcare and working-parent funded hours. There is no taper. If either parent who lives with you is over, the household loses both.

This is not a tax-band story. It is an on/off switch. Finish the tax year at £100,000 and you can still qualify. Finish at £100,000.01 and, for that parent, the schemes stop. Salary is not the test. Take-home is not the test. Adjusted net income is.

Two different pots sit in the same GOV.UK account. Tax-Free Childcare is a 20% top-up on what you still pay (usual cap £2,000 a year per child). Working-parent hours are paid by the local authority to the nursery — about 30 hours × 38 weeks, not a cheque to you. Lose the income test and you can lose both.

What that is worth depends on the child’s age, your private fees, and whether you miss a whole term. At England-average under-two rates, one missed term of 30 hours is often in the £2,500–£3,000 range before Tax-Free Childcare; London and two children sit higher. Consumables still exist when funding runs.

Three doors from here:

No code yet — first term, 23 weeks, maternity dates, no grace period.
Already have a code — the 90-day login, when to stop declaring under, what grace actually does.
HMRC or the nursery has already said no — evidence, 30-day review, what you might repay (top-up, not a year of 30 hours).

The spreadsheet and video sit behind those pages. This hub is only the cliff, the pounds, what £100,000 is, and the three levers that can cut adjusted net income.

What actually stops

One GOV.UK childcare account in England runs two schemes. Fail the income test and both can go. They are not the same money.

Tax-Free Childcare

You pay into an account. For every £8, the government adds £2 — a 20% top-up. Usual cap £2,000 a year per child (£500 a quarter). That doubles to £4,000 if the child is disabled. Miss a login or fail the test and the top-up stops. Money already in the account can still go to the nursery. Withdraw cash and they take the government’s £2 back.

Working-parent funded hours

The local authority pays the nursery, not you. For eligible working families in England that is 30 hours a week for 38 weeks (1,140 hours a year), from the term after the child turns 9 months until school. Consumables and extra hours are still your bill.

You apply once. HMRC decide eligibility for both. You get an 11-digit code for the hours and the same login for Tax-Free Childcare. Reconfirm every three months or the account dies.

Scotland, Wales and Northern Ireland have different funded-hours rules. This hub is England.

What it can cost

Working-parent hours are 30 × 38 weeks = 1,140 hours a year, so about 380 hours a term. If funding never switches on, you pay your nursery’s private rate for those hours — not the rate the council pays the setting.

Coram Family and Childcare’s 2026 survey prices 25 hours of under-two nursery in England at an average £188.75 a week (about £7.55 an hour). Inner London is about £238 a week for the same pattern. The table uses that hourly rate on 30 funded hours, then full-time.

Source: Coram Family and Childcare, Childcare Survey 2026 (England averages, under-twos). Check the latest survey before you treat the pounds as current.

Pattern	Rough extra	If Tax-Free Childcare still runs
30 funded hours, term-time	~£2,900	~£2,300 after the 20% top-up
Full-time (~50 hours)	You still pay the extra 20 hours either way. The miss is the 30-hour slice — still about £2,900	Top-up only on what you still pay, and only if you still pass

Two children, or Inner London, can take that to £4,000–£6,000+ for the same term. Hours only start on 1 January, 1 April or 1 September.

Funded hours are not a zero invoice. Consumables, meals and extra hours still exist.
Tax-Free Childcare only helps if you still pass the same £100,000 test.

£100k is adjusted net income, not salary

The cliff is expected adjusted net income for the tax year (6 April to 5 April), for each parent separately. Exactly £100,000 can still pass. £100,000.01 fails.

Example: one parent expects £108,000 of taxable pay. An extra £9,000 of salary-sacrifice pension brings that parent to about £99,000. They can still qualify. Their partner on £72,000 was never the problem. Flip it — partner on £72,000, this parent still at £108,000 with no cut — and the household loses both schemes.

If the year will still finish well over £100,000 after the three levers below, stop. A £9,000 extra pension can pull £108,000 under. It will not pull £130,000 under without emptying cash you may need for fees. Do not apply or reconfirm as if you were under.

What usually goes in

Pay and bonuses (after salary sacrifice that has already reduced the pay)
Taxable benefits
Self-employed or partnership profit
Taxable interest and dividends outside an ISA
Taxable rental profit
Other taxable income (pensions in payment, some foreign income, trusts)

What stays out

ISA interest and ISA dividends
Student-loan repayments
Nursery fees
Mortgage interest on your home
Marriage Allowance, EIS/VCT tax reducers, a LISA deposit

HMRC start from what they call net income — taxable income after some deductions, not take-home pay — then knock off:

Gross pension contributions — £1 off for £1
Relief-at-source personal pension — the amount you paid × 1.25
Gift Aid — the amount you paid × 1.25
Certain trading or property losses

Scaling up year-to-date pay as if every month looks like this one is not adjusted net income.

Two tests, two clocks

Test 1 — the cap. Each parent must not expect adjusted net income over £100,000 in the tax year the declaration falls in. One parent over sinks the household.

Test 2 — the floor. Over the next three months each of you must usually expect to earn at least 16 hours a week at National Living / Minimum Wage from work. On current GOV.UK figures that is £2,643.68 before tax if you are 21 or over. Check the live page. Dividends, interest, rent and pension income do not count for the floor.

Clock 1 — the tax year looks at 5 April. Clock 2 — the login is every three months.

Three ways to cut adjusted net income

Extra salary sacrifice or net-pay pension — £1 given up is usually £1 off adjusted net income, plus tax and NI saving if the employer scheme exists.
Personal pension from the bank (relief at source) — HMRC treat it as 1.25× what left your account. Larger cash hit than sacrifice for the same cut.
Gift Aid from the bank — same 1.25× maths. Use it if you were going to give anyway. Do not give only to buy hours.

Which page next

Pick one door. Do not read all four.

You are here	Open this
No 11-digit code yet	Don’t miss the first funded term near the £100k cliff
Code already exists	Keep Tax-Free Childcare and funded hours — the 90-day job
Something has already broken	Childcare Service said no

FAQs

Does one pound over £100,000 really stop everything?

Yes. There is no taper. Each parent is tested separately. One parent over, and the household loses both schemes.

Is that my salary or what hits my bank?

Neither. It is adjusted net income.

What if my partner is over and I am not?

The household still fails. The test is each adult who lives with you.

We live in Scotland, Wales or Northern Ireland.

This cluster is England only. Tax-Free Childcare is UK-wide, but do not use these pages for a funded-hours code outside England.