Closed petition Reform £100k income threshold for tax-free childcare and free childcare hours

Closed on 27 October 2023

We want the Government to reform the taxable income threshold for childcare entitlements (tax-free childcare and free childcare hours).

The threshold should apply to households, not individuals, should be adjusted for inflation, and entitlements should be tapered, rather than lost completely.

We believe the threshold should be reformed due to its distortive nature, as highlighted by the Institute for Fiscal Studies:

“childcare entitlements [...] remain limited to families where no parent earns £100,000 or more. Above that level, the entire value of that support is removed - creating a “cliff-edge” effect [...].

"The distortions that this can create are among the most severe you will ever see within a tax and benefit system. A parent with two children under 3 whose childcare provider charges England’s average hourly rate for 40 hours per week [...] earning £130,000 would be worse off than one earning £99,000."

Source: https://ifs.org.uk/news/childcare-reforms-create-new-branch-welfare-state-also-huge-risks-market