From September 2025, many more families across England and Wales will finally benefit from up to 30 hours of funded childcare for their three and four-year-olds. It’s a huge help for working parents, but there’s a catch.

A rule, known as the “£100k childcare trap”, could see some families lose all their entitlement if one parent’s income creeps just over £100,000.

Here’s what you need to know as the scheme rolls out, and how to plan ahead so you don’t get caught out.

For working parents of three and four-year-olds in England and Wales, the government is expanding funded childcare to offer up to 30 hours per week. It’s designed to make it easier to keep working while covering some of the ever-rising costs of childcare.

But there are a few rules:

• You must each earn at least the equivalent of 16 hours a week at minimum wage.
• You apply through HMRC’s Childcare Service account (England) or your local authority (Wales) and reconfirm eligibility every three months.
• You must each earn no more than £100,000 a year (gross income).

That last point is the one that might catch families out – the £100k salary limit. Earn even £1 over, and you could lose the entire entitlement.

This cliff-edge rule only applies if you live in England or Wales.

Scotland offers up to 1,140 hours per year of free early learning and childcare (around 30 hours a week during term time) for all three- to five-year-olds, and some eligible two-year-olds. There’s no income cap – every family qualifies.

Northern Ireland doesn’t have a 30-hour childcare scheme. Instead, families get support in a few different ways.

• Free Pre-School Education: At least 12.5 hours per week (2.5 hours a day, five days a week during term time) for all three- and four-year-olds.
• Tax-Free Childcare: Save up to £2,000 per child per year on childcare costs through the UK-wide scheme.
• Northern Ireland Childcare Subsidy Scheme (NICSS): A 15% discount on childcare fees (capped at £184/month) for eligible working parents using approved providers — with plans to extend this to school-age children from September 2025.

If you live in Northern Ireland, planning usually focuses on making the most of these schemes and budgeting for any shortfall.

Here’s where it gets frustrating. The £100k limit applies per parent, not per household.

That means:

• A couple earning £99,000 each (a combined income of £198,000) still qualify.
• But a single parent, or a household with one main earner on £100,001, loses the entitlement completely.

It’s an all-or-nothing system. Earn £1 over, and you could lose childcare worth £4,000–£6,000 per child, per year.

Plenty of families may only realise there’s a problem when their childcare bill suddenly shoots up. The rule is likely to feel especially unfair because it applies per parent, not per household – just like the High-Income Child Benefit Charge.

• Single high earner or single parent: A single parent earning £105k will lose the full 30 hours entitlement – even though a couple on a combined £180k will still qualify.
• Bonuses and overtime: A one-off bonus could push income over £100k and disqualify a family for a whole term.
• Commission or RSUs: Performance-related pay or RSUs (Restricted Stock Units – shares that vest as taxable income) could unexpectedly take a parent over the limit.

This “cliff-edge” is likely to catch many households by surprise, especially those with variable income or one main earner.

The good news is, that with careful planning, you can often keep your adjusted net income below £100,000, and keep your childcare hours.

Topping up your pension is one of the most effective ways to stay under the limit.

• Pension contributions reduce your taxable income.
• Example: If your salary is £102,000, contributing £2,000 to your pension brings your adjusted net income back to £100,000, saving thousands in childcare costs and boosting your retirement savings at the same time.

If your employer offers salary sacrifice schemes (for electric vehicles, or cycle-to-work), they can reduce your taxable pay and help you stay below the threshold.

If possible, ask your employer if they can defer a bonus to the next tax year, preventing you from losing a whole term’s entitlement.

Donations made under Gift Aid can also reduce your adjusted net income.

If you’re approaching the £100k threshold, it’s the perfect time to speak to a financial planner, not just because of the childcare trap, but because at this salary, tax and income planning really start to matter.

Crossing £100k doesn’t just risk your funded childcare hours. It’s also the point where your personal allowance starts to taper away, creating an effective 60% tax rate on income between £100,000 and £125,140.

A professional adviser can help you:

• Model your income to see exactly how close you are to the limit, and how changes (like pay rises or bonuses) could affect you.
• Optimise your pensions and ISAs to reduce taxable income and grow wealth tax-efficiently.
• Use salary sacrifice and charitable giving to bring income back under key thresholds.
• Plan ahead for bonuses, commissions or RSU vesting, so you don’t lose support unexpectedly.
• Review your wider financial picture, including retirement planning, estate planning, and protection, so you’re not just solving this year’s problem but building a longer-term strategy.

With the right plan in place, you can avoid losing childcare hours, minimise unnecessary tax, and put yourself on a much stronger financial footing for the future.

To set up an initial appointment with an Amber River financial planner, call 0800 915 0000. Alternatively, you can use our contact form to arrange an appointment.