A Political Pledge Focused on Working Parents

Kemi Badenoch has pledged that a future Conservative government would remove the £100,000 income threshold that currently prevents some parents in England from accessing key childcare support. Speaking to the BBC ahead of the Conservative Party conference in October 2026, the party leader argued that people should not be financially discouraged from increasing their earnings.

The proposal targets two schemes: government-funded childcare hours for eligible working parents and Tax-Free Childcare. Under the current rules, a parent whose expected adjusted net income exceeds £100,000 can make a household ineligible for these forms of support.

The Conservatives describe the threshold as a "cliff edge" because eligibility can be lost when income crosses a fixed limit, rather than being withdrawn gradually as earnings rise. The party argues that this can leave some families with little financial benefit from a pay rise and may discourage them from accepting promotions or increasing their working hours.

The pledge is a political proposal, not a change to the current eligibility rules. Any reform would depend on the party entering government and implementing the policy.

Primary reporting: BBC News — Badenoch unveils plan to end £100,000 childcare cliff edge .

How the £100,000 Childcare Threshold Works

The current rules apply to England's childcare schemes. Eligible working parents can receive up to 30 hours of government-funded childcare a week for 38 weeks of the year for children aged nine months to four years. Eligibility depends on several conditions, including the child's circumstances, the parents' work and income, and other requirements.

For working-parent childcare support, neither parent can have expected adjusted net income above £100,000 in the relevant tax year. The same income limit applies to Tax-Free Childcare.

Tax-Free Childcare is a separate scheme. For every £8 a parent pays into an eligible childcare account, the government contributes £2, up to £2,000 per child per year in the standard case. It is not a cash payment that parents can spend freely; the money is intended to help pay approved childcare costs.

The threshold does not mean that every form of childcare support disappears at once. In England, eligible three- and four-year-olds can still receive 15 hours of universal funded childcare a week for 38 weeks a year, regardless of parental income. Other support may also be available depending on the family's circumstances.

Parents should check the current official eligibility rules before making financial decisions:

• GOV.UK: Free Childcare for Working Parents
• GOV.UK: Tax-Free Childcare eligibility

The Separate Tax Trap: Why the Marginal Rate Can Reach 60%

The childcare threshold is only one part of the financial calculation. The UK income tax system also withdraws the standard Personal Allowance once an individual's adjusted net income exceeds £100,000.

Under the current rules, the Personal Allowance is reduced by £1 for every £2 of adjusted net income above £100,000. The standard £12,570 allowance is fully withdrawn at £125,140.

For taxpayers subject to the usual 40% higher rate, this withdrawal creates an effective 60% marginal income tax rate over the affected band: an additional £1 of income can lead to 40p of ordinary income tax plus an effective 20p from the loss of Personal Allowance.

This is a marginal rate, not the tax rate applied to all earnings. It also does not include every possible factor, such as National Insurance contributions, student loan repayments or changes in childcare support. Individual circumstances can therefore produce different effective outcomes.

The distinction matters. The Personal Allowance taper is part of the income tax system, while the childcare limit is an eligibility rule for particular support schemes. Removing the childcare threshold would not, by itself, abolish the 60% marginal income tax band.

The Institute for Fiscal Studies has explained how the Personal Allowance taper and childcare eligibility limits can combine to create unusually high effective marginal costs for some working parents.

Institute for Fiscal Studies: Options for cutting direct personal taxes and supporting low earners .

Why a Pay Rise Can Leave a Family Worse Off

A fixed eligibility threshold can create a sharp change in household finances. A parent may face a higher income tax burden on part of their earnings at the same time as the household loses access to childcare support.

Consider a simplified example. A parent with a young child receives a promotion that raises their adjusted net income from just below £100,000 to above the limit. The additional salary may be partly offset by higher tax and the loss of childcare assistance. Depending on childcare costs, the number and ages of children, working arrangements and other circumstances, the household may gain much less disposable income than the headline salary increase suggests.

The effect is not identical for every family. A household with one child using relatively inexpensive childcare will face a different calculation from a family paying for full-time nursery care for two young children. Nor does every parent just above the threshold necessarily become worse off overall.

This is why general claims that all parents lose money by earning more are misleading. The more accurate point is that the rules can create a strong financial disincentive for some households, particularly where the value of lost childcare support is high.

Would Removing the Threshold Encourage More People to Work?

The economic case for reform is that workers respond to the amount of income they keep after tax and childcare costs, not simply to their gross salary. If accepting extra work produces only a small increase in disposable income, some people may decide that the additional hours, responsibility or childcare arrangements are not worthwhile.

Removing the threshold could reduce that particular disincentive. It might make promotions more attractive to some parents, reduce the incentive to manage earnings around the limit and make childcare planning more predictable.

However, the scale of any change in employment or working hours cannot be assumed from the policy design alone. It would depend on how many parents change their behaviour, whether childcare places are available, the cost of care, employers' working arrangements and the interaction with other taxes and benefits.

The policy also addresses only one obstacle to work. High childcare prices, limited nursery capacity, inflexible working hours and the availability of suitable places can remain barriers even if the income threshold disappears.

The Public-Finance Question: Who Should Receive Support?

The Conservatives said removing the childcare threshold would cost approximately £700 million and proposed funding the change through savings from public bodies operating at arm's length from ministers. The party said those changes could generate £1.6 billion by 2029–30.

These are the party's stated cost and funding figures, not evidence that the money has already been saved or that the proposal has been independently shown to be fully funded. A proper assessment would need to examine which organisations would be affected, whether the savings are achievable, the timing of the savings and any consequences for public services.

There is also a legitimate distributional question. Removing an income limit would extend support to households with earnings well above £100,000, including some that could afford a larger share of their childcare costs. Critics may argue that public resources should be focused on families facing the greatest financial pressure.

Supporters can respond that a universal eligibility rule above the threshold would remove a distortion in the tax and benefit system, simplify decisions for parents and reduce the incentive to limit earnings. But those potential benefits should be weighed against the direct cost and the opportunity cost of spending public money on higher-income households.

The debate is therefore not simply about whether working parents deserve support. It is about how the government should balance work incentives, fairness, affordability and the best use of limited public funds.

Conservative Party: Pledge to abolish the childcare cliff edge .

What a Better-Designed Policy Could Look Like

Removing a threshold is one possible reform, but it is not the only way to reduce the disincentive. Policymakers could also consider a gradual withdrawal of support, a higher income limit, or a redesigned system that links assistance more closely to childcare costs and household circumstances.

Each option has trade-offs:

• Remove the threshold: This would eliminate the specific eligibility cliff edge but extend public support to higher-income households and increase the cost of the scheme.
• Introduce a gradual taper: This could prevent support from disappearing all at once, although it would create a more complicated calculation and still reduce support as income rises.
• Raise the threshold: This could protect more middle- and higher-income working parents without extending eligibility to every income level, but it would leave the cliff edge in place at a higher point.
• Review childcare affordability more broadly: Improving access to places, transparency around additional fees and flexibility for working parents could address problems that an income-limit change alone cannot solve.

A serious policy assessment should compare these options using estimated costs, distributional effects, likely behavioural responses and the practical capacity of childcare providers. It should also explain how the proposed funding would be delivered and monitored.

What Parents Should Check Now

Until the rules formally change, parents should make decisions based on current eligibility rather than a political pledge. Those approaching the £100,000 threshold may wish to review their expected adjusted net income and understand which childcare schemes they currently use.

• Check adjusted net income rather than relying only on headline salary. Certain pension contributions and Gift Aid donations can affect the calculation, subject to HMRC rules.
• Review eligibility for funded childcare hours and Tax-Free Childcare separately.
• Compare the actual childcare fees and support available for each child, particularly if more than one child attends nursery.
• Seek qualified tax or financial advice before changing pension contributions, hours or remuneration arrangements solely to remain below a threshold.

HMRC explains how adjusted net income is calculated here: GOV.UK: Adjusted net income .

Editorial Conclusion: A Real Incentive Problem, but Not a Complete Growth Strategy

The £100,000 childcare threshold raises a genuine policy question: should a modest increase in earnings be capable of removing substantial childcare support from a working family? When eligibility changes abruptly, some households can face weak incentives to accept additional work, even when their gross salary rises.

Yet the case for reform should not rest on political slogans alone. Removing the threshold could improve incentives for some parents, but it would also extend publicly funded support to higher-income households and require a credible funding plan. The effect on employment and economic growth would depend on how families, employers and childcare providers respond.

The strongest conclusion is that the current rules deserve scrutiny, not that one reform will solve the UK's childcare affordability or productivity challenges. A durable solution should make additional work financially worthwhile, protect access to childcare and demonstrate that public spending delivers benefits proportionate to its cost.