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UK urged to fix childcare cliff edge that can cut working hours
A report by CenTax says the income threshold could push average earners to about £124,000 by 2030 to avoid losing free childcare, and estimates income suppression could grow from around 1,000 families in 2022 to nearly 12,000.
UK policy makers are facing pressure to change the way taxpayer-funded childcare is awarded in England, after critics said a £100,000 income cutoff can lead parents to reduce work to avoid losing eligibility. According to research cited by the Guardian Economics, families with young children where both parents earn under £100,000 can qualify for 30 hours of care per week, but entitlement drops to zero if either parent expects to earn above that threshold. The report from the Centre for Tax Reform, CenTax, argues that since the latest childcare expansion in 2024, the policy creates incentives for some higher-paid workers to cut back on hours, and may also encourage some mothers to exit the labor force.
CenTax estimates that by the end of this parliament in 2030, a parent who crosses the “cliff edge” would need to earn about £124,000 to be no worse off after losing free childcare. The think tank also points to “bunching” of incomes just below the threshold, suggesting that in 2022 about 1,000 families suppressed earnings to stay eligible, a number it says could rise to almost 12,000 by 2030.
The report also highlights that the eligibility test is based on anticipated earnings for the year ahead, and it suggests some families appear to claim care even though they later end up above £100,000. It proposes options including limiting free childcare to 15 hours for households above £100,000 instead of withdrawing it completely, which it estimates would cost £210 million.