The Conservative Party has pledged to abolish the £100,000 income cap for government-funded childcare support, describing the current threshold as a “cliff edge” that penalises working families.
The proposal, announced by party leader Kemi Badenoch ahead of the Conservative Party Conference in Birmingham, seeks to reform a system where eligibility for 30 hours of free childcare and Tax-Free Childcare is withdrawn entirely the moment one parent’s “adjusted net income” exceeds £100,000.
Under the current rules, a family with two parents each earning £99,000—a combined household income of £198,000—remains eligible for full support. However, if a single parent or one person in a couple earns £100,001, the support is stopped completely. This can result in a household being thousands of pounds worse off despite receiving a small pay rise.
The Conservatives estimate that removing this cap would cost approximately £700 million per year. The party stated that the policy would be funded by a £1.6 billion saving target by 2029-30, achieved by reducing the number of public servants at “arm’s-length” public bodies. Specific organisations identified for potential headcount reductions include Arts Council England and the Environment Agency.
The ‘Cliff Edge’ explained
The £100,000 threshold has remained frozen since its introduction in 2017. Due to wage growth, a process known as fiscal drag has resulted in an increasing number of professional households hitting the limit and losing their entitlements.
The loss of support covers two main areas:
- 30 Hours Free Childcare: Available for working parents of children aged nine months to four years. While all three- and four-year-olds are entitled to 15 hours of universal childcare regardless of parental income, the additional 15 hours is means-tested.
- Tax-Free Childcare: A scheme where the government pays £2 for every £8 parents pay into an online account, up to a maximum of £2,000 per child per year.
According to ITV News, the announcement was made as the party gathered for its annual conference, with Mrs Badenoch suggesting the move would help “aspirational” families who are currently deterred from seeking promotions or pay rises that would take them over the threshold.
Practical implications for parents
As the policy remains a proposal from the opposition, current rules still apply. Parents approaching the £100,000 limit often manage their “adjusted net income” to remain eligible for benefits.
Under HMRC rules, adjusted net income is total taxable income minus certain deductions. Families currently hitting the limit can sometimes stay below the £100,000 threshold by:
- Increasing personal pension contributions (which are deducted from the total income calculation).
- Making charitable donations via Gift Aid.
- Utilising salary sacrifice schemes for items such as cycle-to-work or ultra-low emission vehicles, where the employer allows.
The Conservative proposal has not yet detailed exactly how a “tapered” system might replace the hard cut-off, or whether the 15 hours of universal childcare for older toddlers would be affected by any wider reform. Critics of the plan are likely to question the sustainability of funding childcare through cuts to public bodies and whether the move prioritises higher earners over lower-income families struggling with the core costs of provision.