Conservative leader Kemi Badenoch has pledged to remove the £100,000 earnings limit that blocks some higher-paid parents in England from receiving government-funded childcare, arguing that the rule can leave families worse off after a pay rise or promotion.
Under the Conservative proposal, working parents would continue to qualify for up to 30 hours of funded childcare each week even if one parent earns more than £100,000 a year. The party estimates that the policy would cost about £700 million annually.
The plan was announced ahead of the Conservative Party conference in Birmingham and targets what Badenoch has described as a childcare “cliff edge”.
At present, eligibility for the working-parent childcare offer in England is withdrawn if either parent has expected adjusted net income above £100,000 in a tax year. The rule is based on individual income rather than total household earnings. Parliament has confirmed that the £100,000 childcare threshold is calculated on an individual basis.
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That creates an unusual outcome: a couple earning £99,000 each may remain eligible, while a family in which one parent earns slightly above £100,000 can lose access to the additional support.
The Conservative proposal would remove that upper earnings limit, but it is important for parents to know that the rules have not changed. This is an opposition policy pledge rather than existing government policy.
Why the £100,000 childcare threshold matters
The £100,000 limit does not remove every form of government-funded early education.
All three- and four-year-olds in England can still qualify for the universal 15 hours of funded early education, regardless of their parents’ income. The earnings threshold affects the additional working-parent entitlement.
For families with younger children, however, crossing the threshold can have a much bigger financial effect because eligible working parents can receive up to 30 hours of funded childcare from the age of nine months.
Tax-Free Childcare also uses a £100,000 adjusted-net-income limit, meaning some higher-earning parents can lose access to more than one form of childcare support.
The government has previously acknowledged concerns about the threshold.
In a parliamentary answer in June, the Treasury said it understood concerns surrounding both the £100,000 childcare limit and the High Income Child Benefit Charge. However, it said moving to a household-based system without leaving some families worse off could carry a significant cost to the public finances. UK Parliament
Parents may be turning down pay rises
The strongest argument for reform is that the current system may influence how some parents work and earn.
Research published by the Centre for the Analysis of Taxation, CenTax, found evidence that some parents keep their income below £100,000 to avoid losing childcare support.
CenTax said about 1,100 parents were estimated to have kept their earnings below the threshold in 2022. It projected that the number could rise to almost 12,000 by 2030 if the current system remains unchanged. The research also identified an employment effect within families.
Around 6 per cent of lower-earning partners were out of work when the higher earner remained below the £100,000 threshold, according to the analysis. That increased to 9 per cent once the higher earner crossed the threshold. The lower-earning partner was usually the mother.
This is one reason Badenoch has argued that the system can discourage people from accepting promotions, additional hours or higher salaries.
“No one should be turning down a promotion or a pay rise because they literally cannot afford to earn more,” she said when announcing the plan.
She also argued that women could be disproportionately affected because they often take on a larger share of childcare responsibilities.
Conservatives say job cuts would fund policy
The Conservatives estimate that removing the income cap would cost about £700 million a year.
The party says the policy would be funded through reductions in staff numbers at arm’s-length public bodies.
It has identified organisations including Arts Council England and the Environment Agency as examples of bodies where staffing reductions could be made, while NHS organisations would be excluded from the proposed cuts. Conservative officials estimate the changes could save about £1.6 billion by the end of the decade.
That funding proposal is likely to become a major part of the debate because cutting staff across public bodies could raise questions about the effect on services and whether the projected savings could be achieved.
Labour attacks plan for helping higher earners
Labour has criticised the proposal, arguing that it would direct additional public support towards higher earners.
A Labour spokesperson also pointed out that the £100,000 threshold was introduced while the Conservatives were in government. The party said the current Labour government was already supporting families through expanded childcare provision and free primary school breakfast clubs, while its wider childcare review would examine further changes to early-years support.
The political dispute is therefore likely to centre on two competing questions: whether the £100,000 threshold creates a genuine disincentive to work, and whether taxpayers should provide additional childcare support to households with six-figure earners.
Government does not know exactly how many families lose support
One important gap remains in the official data.
HM Revenue and Customs does not know exactly how many families lose Tax-Free Childcare because their income passes £100,000.
In a parliamentary answer on 14 September, the Treasury said many families who become ineligible simply do not apply again and are not required to report that they have crossed the threshold. UK Parliament
That means there is no verified government figure showing the full number of households affected.
The lack of official data makes independent research analysis particularly important in estimating how the rule influences parental employment and household decisions
What parents should know now
For families in England, nothing has changed yet. The £100,000 adjusted-net-income limit remains in force under the current childcare system.
Parents earning close to the threshold should therefore continue to check their eligibility under existing rules rather than assuming Badenoch’s proposal has already taken effect.
The Conservative policy would only change the system if it were eventually implemented by a future government.
For now, the announcement adds pressure to an already active debate over whether England’s childcare system should continue to withdraw substantial support once one parent’s earnings cross £100,000.
