The £100,000 childcare cliff, calculated
Most tax thresholds taper. This one does not. If your adjusted net income reaches £100,000, you lose Tax-Free Childcare and the funded hours for working parents outright, and both are tested per parent with no household averaging. For two children that is up to £4,000.00 a year of Tax-Free Childcare gone, on top of the funded hours, for one extra pound of income. It is the sharpest edge in the UK tax system and it sits inside the same window as the 60% personal allowance taper, which is why so many people meet both at once. Figures checked 2026-08-29 against gov.uk, on the 2026/27 rates.
Adjusted net income £105,000
Over the cliff
You are £5,000 above the £100,000 limit, so you lose Tax-Free Childcare worth up to £2,000.00 a year for one child, and the funded hours entitlement as well.
Getting back under
Sacrificing another £5,000.00 into your pension takes your adjusted net income to £100,000 and restores both entitlements. Your take-home falls by £1,900.00, and the money is still yours, it is in your pension.
So you give up £1,900.00 of spendable pay to recover £2,000.00 of childcare support plus the funded hours. On the Tax-Free Childcare figure alone that is worth doing.
Why this is worse than the 60% trap
Between £100,000 and £125,140 the personal allowance is withdrawn gradually, which produces the 60% marginal rate. Childcare does not taper. One pound of adjusted net income over £100,000 removes both entitlements completely. For a parent of one child, that single pound can cost £2,000.00 in Tax-Free Childcare alone.
It is also tested per parent, and there is no household averaging: two parents on £99,000 each keep everything, while one parent on £101,000 and one on nothing loses it.
Tax-Free Childcare cap £2,000 per child a year (£4,000 for a disabled child), from gov.uk, checked 2026-08-28. Funded-hours eligibility from gov.uk, checked 2026-08-29. The cash value of the funded hours is not shown because it depends on your local authority's funded hourly rate, and no single national figure would be true.
Why a cliff is worse than a taper
Between £100,000 and £125,140 the personal allowance is withdrawn at £1 for every £2, so the pain arrives gradually and the marginal rate settles at 60% before National Insurance. Childcare works differently. There is no taper and no partial entitlement: at £100,000 you qualify, at £100,001 you do not. Someone earning £100,000 takes home £68,557.40, and the person earning one pound more takes home almost exactly the same while losing thousands in childcare support.
What counts towards the £100,000
Adjusted net income, not salary. That means a bonus counts, dividends count, savings interest counts, and rental profit counts. It also means the two things that reduce it are pension contributions and Gift Aid donations. This is why salary sacrifice is the standard answer: it lowers the figure both childcare tests actually look at. The adjusted net income calculator works out your real figure, and the salary sacrifice calculator shows what a contribution costs your take-home.
The per-parent trap
Each parent is tested separately, and there is no averaging across the household. Two parents earning £99,000 each, £198,000 between them, keep everything. One parent earning £101,000 with a partner earning nothing loses it. That is not a drafting accident, it is how the rule is written, and it catches single-earner households hardest.
What this tool does not price
The funded hours are worth real money, often more than Tax-Free Childcare, but their cash value depends on the hourly rate your local authority is funded at. There is no single national figure that would be true for everyone, so this calculator shows the entitlement as lost rather than inventing a number for it. The Tax-Free Childcare figure it does show is the published cap of £2,000 per child a year, or £4,000 for a disabled child.
2026/27 rates, checked 2026-08-28. Childcare rules from gov.uk. Method on the about page.