Earning just £1 over £100,000 is enough to lose access to funded childcare. In England and Wales, working parents of three- and four-year-olds can receive up to 30 hours of funded childcare . But once income goes over £100,000, that support does not taper or reduce. It stops entirely. This is what’s commonly known as the £100k childcare trap.

But what many higher earners don’t realise is that earning over £100k doesn’t necessarily mean you lose out. It all depends on how your income is structured and planned.

Below, we explain how the rule works and how to plan ahead so you don’t get tripped up.

How funded childcare eligibility works

For working parents of three- and four-year-olds in England and Wales, funded childcare provides up to 30 hours a week. To qualify:

• Both parents (or the sole parent in a single-parent household) must be working
• Each must earn at least the equivalent of 16 hours a week at National Minimum Wage
• Each parent’s adjusted net income must be £100,000 or less

Eligibility is checked through HMRC’s Childcare Service. The key detail here is that the test is based on adjusted net income, not headline salary.

What the £100k childcare trap actually means

The £100,000 limit applies per parent, not per household. In practice, that leads to outcomes like:

• Two parents earning £99,000 each continuing to qualify
• A household where one parent earns £100,001 losing the funded childcare hours entirely

There is no partial entitlement. Once adjusted net income exceeds £100,000, the childcare support is removed.

Who tends to get caught out

The £100k childcare trap often only becomes obvious when a childcare bill suddenly jumps. Because the rule applies per parent, not per household, the outcome can feel particularly uneven.

• Single parents or single-earner households – Because the £100k limit is assessed per parent, not per household, families with one main earner are often affected first. A single parent earning above the threshold will lose the funded childcare hours entirely. The same applies in households where one parent earns significantly more than the other. If one income sits over £100k, the entitlement is removed – even if overall household income is lower than that of a couple with two evenly split incomes.
• Bonuses and overtime – One-off bonuses or periods of overtime regularly catch families out. Even where base salary sits below £100,000, additional income paid in the same tax year can push adjusted net income over the limit and trigger the loss of funded childcare.
• Commission and share-based pay – Parents paid through commission or equity are particularly exposed. Commission spikes or RSUs vesting and taxed as income can take adjusted net income over £100,000 unexpectedly – even when headline salary hasn’t changed. For example a parent with a base salary of £95,000 may assume they’re safely under the limit, but a £7,500 bonus or a share award vesting in the same tax year can take adjusted net income over £100,000.

These are often the situations where families assume funded childcare is simply “gone”, when in reality it’s the timing and structure of income that’s caused the issue.

Keeping income below the £100k threshold

Although the £100k childcare trap is blunt, it isn’t always unavoidable. Because eligibility is based on adjusted net income, not headline pay, there is often scope to manage how income is structured. For many parents, this comes down to understanding which elements of pay count towards the threshold – and which decisions reduce it.

• Pension contributions reduce adjusted net income. For example, someone earning £108,000 would normally lose their funded childcare hours. By increasing pension contributions by £8,000, their adjusted net income falls back to £100,000 – restoring eligibility while also strengthening long-term retirement savings.
• Salary sacrifice (where available) can reduce taxable income before it’s assessed for childcare purposes. For instance, a parent earning £104,500 who uses salary sacrifice for pension contributions may be able to bring their adjusted net income below the £100k limit without changing their role, hours, or headline salary. What matters is understanding which salary sacrifice schemes genuinely reduce adjusted net income – not all benefits do.
• Variable Income such as bonuses, commission and share-based pay are often the most common reasons families lose eligibility unexpectedly and timing can matter as much as the amount. In some cases, agreeing for a bonus to be paid in a different tax year can help avoid tipping over the £100k limit. This isn’t always an option, but where flexibility exists, understanding the timing of bonus payments can make a meaningful difference.
• Gift Aid donations can reduce adjusted net income. For example, a parent earning just over the threshold who already donates to charity may find that making those donations via Gift Aid brings adjusted net income back below £100,000 – provided it’s affordable and part of a wider plan.

 These aren’t loopholes. They’re part of how the income test works – but they only help if they’re considered early enough.

Why this often overlaps with tax planning

Earning over £100,000 already carries wider tax consequences, including the tapering of the personal allowance.

When higher tax and the loss of childcare support happen together, the combined impact can be significant – which is why this threshold often becomes a broader financial planning conversation.

Porta’s Take

For higher earners, the rule itself is clear: earn over £100k and funded childcare is removed. Where people get tripped up is assuming that outcome is unavoidable.

Because eligibility is based on adjusted net income, careful planning can often prevent families from losing funded childcare unnecessarily. Without that planning, the loss of support can amount to several thousand pounds a year – often at a stage of life when childcare costs are already high.

This is where joined-up advice makes the difference: understanding the rule early, anticipating when it bites, and making deliberate decisions so you’re not tripped up by it by default.

Important information

This article provides general information only and does not constitute personal financial advice. The information is based on our understanding of current regulations, which may change in future. Decisions about your finances should always be made based on your individual circumstances. If you’re unsure about the suitability of any course of action, you should seek regulated financial advice. The Financial Conduct Authority does not regulate tax planning, estate planning, trusts or wills. The value of your investments can go down as well as up, so you could get back less than you invested.

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