Guide

The £100k Childcare Trap: Keep 30 Hours and Tax-Free Childcare With a Pension

Written by James Whitfield·Last checked 18 October 2026·Checked against 2026/27 HMRC rates

Earn £1 over £100,000 of adjusted net income and a working family in England loses the 30 hours of funded childcare and Tax-Free Childcare for every child, on top of the personal allowance taper. A pension contribution is the standard, legal way back under the line.

Quick answer

If you or your partner expects adjusted net income over £100,000 in the tax year, your family cannot get the 30 hours of funded childcare (children from 9 months to 4 years in England) or Tax-Free Childcare (up to £2,000 per child a year) 12. Gross pension contributions reduce adjusted net income 3, so paying enough into a pension to get to £100,000 or below restores eligibility. On a £108,000 salary that means an £8,000 gross contribution, which costs about £3,200 after tax relief.

Key facts
  • The test is each parent's adjusted net income for the current tax year, not salary and not household income. 1
  • Over £100,000 for either parent: no 30 hours and no Tax-Free Childcare. 12
  • Tax-Free Childcare adds £2 for every £8 you pay, up to £500 a quarter (£2,000 a year) per child, £4,000 if disabled. 2
  • You reconfirm eligibility every 3 months, so plan contributions for the whole tax year. 1
  • Between £100,000 and £125,140 the personal allowance taper also makes pension relief worth about 60%. 4

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What exactly do you lose at £100,000?

Two separate schemes use the same £100,000 test. Free childcare for working parents in England gives 30 hours a week, for 38 weeks a year, for children aged 9 months to 4 years 1. Tax-Free Childcare tops up what you pay a registered provider by 25%: £2 for every £8, up to £2,000 per child per year, for children up to 11 (16 if disabled) 2.

Both stop if either parent expects adjusted net income above £100,000 for the tax year. One partner earning £101,000 and the other £20,000 loses both; a couple each earning £95,000 keeps both. Each parent must also expect to earn at least £2,643.68 over the next 3 months (16 hours a week at the £12.71 National Living Wage) 1.

What counts as adjusted net income?

Adjusted net income is your total taxable income (salary, bonus, benefits in kind, self-employed profit, rent, savings interest and dividends) less certain reliefs. The two that matter most here are the gross amount of personal pension contributions made under relief at source, and Gift Aid donations grossed up 3. Pension contributions taken from pay under a net pay arrangement or salary sacrifice already reduce the income figure, because they come off before tax.

Employer pension contributions do not count as your income at all, which is why salary sacrifice is so effective here.

Worked example: getting from £108,000 back to £100,000

Sophie earns £108,000. Her partner earns £40,000. They have two children, aged 2 and 3, in nursery. With no pension contribution beyond her workplace minimum (made through salary sacrifice and already deducted), her adjusted net income is £108,000, so the family loses both schemes. She pays £6,400 into a relief-at-source SIPP; the provider adds £1,600, making £8,000 gross.

Sophie · £108,000 salary · £8,000 gross SIPP contribution, 2026/27 (England)
Adjusted net income before (salary)£108,000
Gross pension contribution−£8,000
Adjusted net income after£100,000
Paid by Sophie£6,400
Higher-rate relief claimed through Self Assessment (20%)£1,600
Tax saved by restoring £4,000 of personal allowance (40%)£1,600
Real cost of £8,000 going into her pension£3,200

On top of the tax, the family keeps Tax-Free Childcare of up to £2,000 per child (£4,000 for two) and 30 funded hours a week for both children. The childcare value alone can be worth more than the contribution costs. 12

How to plan it, step by step

  1. Estimate the whole tax year's income, including bonus, overtime, taxable benefits such as private medical cover, rent and savings interest.
  2. Work out the gap above £100,000 and add a margin of £1,000 or so for a bonus or interest you did not expect.
  3. Choose the route. Salary sacrifice, if your employer offers it, lowers your salary directly and saves 2% employee NI too. Otherwise pay into a relief-at-source pension or SIPP: pay 80% of the gap and the provider adds the rest.
  4. Contribute before 5 April. The test is for the tax year, and you reconfirm every 3 months, so a contribution early in the year makes your declaration accurate. 1
  5. Claim the higher-rate relief on a relief-at-source contribution through Self Assessment, entering the gross amount. The guide to the pension boxes on your tax return shows where.
  6. Check the annual allowance: £60,000 including employer contributions, with unused allowance from the last three years available to carry forward 5.

What if you are already over £100,000 this year?

If your income rises part-way through the year, for example after a pay rise or bonus, you can still contribute before 5 April to bring the year's adjusted net income back to £100,000. Update your childcare account at the next reconfirmation. If you were not eligible and claimed anyway, HMRC can recover Tax-Free Childcare top-ups and the childcare provider can charge for the funded hours, so do the sums before you reconfirm.

Frequently asked questions

Do you lose 30 hours free childcare if you earn over £100,000?

Yes. If you or your partner expects adjusted net income over £100,000 in the tax year, you cannot get the 30 hours for working parents in England, even if the other parent earns much less.

Can a pension contribution get me back under £100,000 for childcare?

Yes. Gross relief-at-source pension contributions are deducted from adjusted net income, and salary sacrifice lowers your salary directly. If they bring adjusted net income to £100,000 or below, you can get the 30 hours and Tax-Free Childcare again.

Is the £100,000 limit based on salary or adjusted net income?

Adjusted net income: all taxable income for the year, including bonus, benefits, rent, interest and dividends, less gross pension contributions and grossed-up Gift Aid.

Is it household income?

No. Each parent is tested separately. A couple each on £95,000 can qualify; a couple on £101,000 and £20,000 cannot.

How much do I need to pay into my pension?

Enough gross contribution to cover the amount above £100,000, plus a small margin. On £108,000 that is £8,000 gross, which is £6,400 paid into a relief-at-source pension, and costs about £3,200 after all tax relief.

What about Tax-Free Childcare?

It has the same £100,000 test. Below it, the government adds £2 for every £8 you pay, up to £2,000 per child a year (£4,000 if disabled), for children up to 11.

Sources & references

  1. Free childcare for working parents (30 hours) — GOV.UK
  2. Tax-Free Childcare — GOV.UK
  3. Adjusted net income — GOV.UK
  4. Income Tax rates and Personal Allowances — GOV.UK
  5. Pension annual allowance — GOV.UK

Every headline figure above is checked against the official GOV.UK / HMRC guidance listed here for the 2026/27 tax year. Links open on GOV.UK.

Disclaimer: General information for 2026/27, not financial advice. Free childcare hours described here are for England; Scotland, Wales and Northern Ireland run different schemes, but Tax-Free Childcare and the £100,000 test apply UK-wide.