Up to 99,000 children are missing out on childcare support because of a “cliff edge” earnings threshold that is freezing out working parents.
Eligible parents who work can receive up to 30 hours of free childcare per week. For parents with three- or four-year-old children, they can claim 15 hours of free childcare weekly, regardless of their income.
However, families do not qualify for the full 30 hours if one parent has an adjusted net income exceeding £100,000. This means that a family with each parent earning £99,000 (totaling £198,000 household income) would qualify, while a family where one parent earns £101,000 and the other is unemployed would not receive the additional assistance.
New estimates from the Department for Education (DfE), obtained through a Freedom of Information Act request by Quilter, reveal that between 50,500 and 99,000 children were impacted by the £100,000 earnings limit in 2025/26.
According to the DfE, the value of funded childcare support unavailable to these families amounted to up to £874 million. These figures represent a significant increase from 2018/19 when between 10,900 and 22,500 families were affected.
The rise in numbers reflects more individuals gaining access to free childcare as the program was expanded to include children aged nine months to two years.
Ian Futcher, a financial planner at Quilter, highlighted that even a small pay raise, promotion, or bonus could lead to a family losing thousands of pounds’ worth of childcare support annually.
Analysis using the Bank of England inflation calculator, specifically CPI, indicates that if the childcare threshold had kept pace with inflation since its inception, it would now be around £137,000.
To remain eligible for free childcare hours, families can consider increasing pension contributions or utilizing salary sacrifice, as eligibility is based on adjusted net income. Salary sacrifice involves agreeing to give up a portion of pre-tax salary for non-cash benefits, such as pension scheme contributions.
Futcher emphasized that planning opportunities are available to help families maintain eligibility for childcare support and other tax allowances. Understanding these thresholds can significantly impact family finances.
The Mirror has reached out to the DfE for comment.