Up to 99,000 children are now missing out on government-funded childcare support because of the £100,000 earnings threshold, according to Department for Education estimates obtained by Quilter through a Freedom of Information request.
The figures show that between 50,500 and 99,000 children were affected by the income limit in 2025/26, making their families ineligible for the working parents funded childcare entitlement because one parent exceeded the earnings threshold.
According to the Department for Education estimates, the value of childcare support unavailable to those families ranged from £446m to £874m in 2025/26.
The data suggests the number of children affected has risen substantially since 2018/19, when between 10,900 and 22,500 children were estimated to have been excluded from the entitlement as a result of the income limit. At that time, the value of support unavailable to affected families was estimated at between £41m and £84m.
Under current rules, households lose eligibility for the working parents funded childcare entitlement if either parent has adjusted net income above £100,000.
Quilter said this can create a significant financial cliff edge, with a pay rise, promotion or bonus potentially resulting in the loss of childcare support worth thousands of pounds a year.
The increase in the number of families affected follows the expansion of childcare support in recent years. In 2018/19, working parents of three and four-year-olds could access 15 additional funded hours a week.
By 2024/25, funded childcare had been extended to eligible children aged between nine months and two years, while by 2025/26 eligible children in that age group could access up to 30 funded hours.
As a result, both the number of eligible children and the value of support available have increased.
The childcare earnings threshold also coincides with another tax threshold affecting higher earners.
Once adjusted net income exceeds £100,000, an individual’s personal allowance begins to be withdrawn, creating an effective tax rate of 60% on income between £100,000 and £125,140.
Quilter said analysis using the Bank of England inflation calculator found that if the childcare threshold had increased broadly in line with inflation since its introduction, it would now stand at around £137,000.
Similarly, if the personal allowance taper threshold had risen with inflation, it would now begin at around £159,000.
The firm noted that because eligibility for childcare support is based on adjusted net income rather than salary alone, some parents may be able to remain below the threshold through measures such as increasing pension contributions, salary sacrifice arrangements, reviewing the impact of bonuses and taxable benefits, and monitoring adjusted net income throughout the tax year.
Ian Futcher, financial planner at Quilter, said:
“These figures demonstrate how a threshold that once affected a relatively small number of families is now having a much wider impact. While £100,000 is still a high income, it is not worth what it was when this threshold was set. As earnings and childcare costs have risen, more families are finding themselves caught by rules that were designed in a different economic environment.
“The childcare income limit creates one of the sharpest financial cliff edges in the system. If a parent’s adjusted net income exceeds £100,000, their family loses eligibility for the working parents’ childcare entitlement entirely. In practice, that can mean a pay rise, promotion or bonus unexpectedly results in the loss of support worth thousands of pounds.
“This increasingly catches families out because the threshold has remained unchanged while wages have risen and childcare support has expanded. More and more households are discovering they have crossed a line that triggers a significant change in their financial position.
“The impact can be particularly stark because the childcare threshold sits alongside the personal allowance taper, which can leave people questioning whether earning more is delivering the financial benefit they expected.
“At a time when policymakers want people to develop their careers, increase earnings and improve their financial resilience, these types of cliff-edge policies risk acting as a brake on ambition.
“The good news is that there are often planning opportunities available. Eligibility is based on adjusted net income, so pension contributions can be particularly effective. Not only can they help improve long-term retirement outcomes, but they may also help preserve access to valuable childcare support and other tax allowances. Given the sums involved, understanding these thresholds can make a significant difference to family finances.”
Main image: Children, ben-wicks-iDCtsz-INHI-unsplash
