Childcare and Child Benefit: How the £100,000 and £60,000 Income Limits Work

There are two income limits that regularly cause confusion for parents.

One relates to Free Childcare for Working Parents and Tax-Free Childcare.

The other relates to Child Benefit.

They are completely different limits and they work in different ways.

For the 2026/27 tax year, the important figures are broadly:

£100,000 adjusted net income per parent for childcare support

and

£60,000 adjusted net income for the High Income Child Benefit Charge

Understanding the difference can be particularly important if your income is close to either threshold.

The £100,000 Childcare Limit

For working parents in England, eligibility for Free Childcare for Working Parents is subject to an income test.

If either you or your partner expects to have adjusted net income of more than £100,000 for the tax year, you will not normally qualify.

The same £100,000 upper income limit also applies to Tax-Free Childcare. GOV.UK

The important point is that this is a per-person limit.

For example, if one parent earns £95,000 and the other earns £95,000, their combined income is £190,000 but they may still qualify, assuming the other conditions are met.

But if one parent has adjusted net income of £105,000 and the other earns £30,000, the £100,000 limit has been exceeded by one parent and the childcare support can be lost.

That creates quite a sharp cliff edge.

What Free Childcare Is Available?

Under the current English scheme, eligible working parents with children aged from 9 months to 4 years can receive up to 30 hours of free childcare per week for 38 weeks of the year, subject to the eligibility rules. GOV.UK

There are other conditions, including minimum earnings requirements, so the £100,000 limit is not the only test.

The childcare schemes also differ across England, Scotland, Wales and Northern Ireland, so this article is referring primarily to the rules applying in England.

What About Tax-Free Childcare?

Tax-Free Childcare is a separate scheme.

Broadly, for every £8 an eligible parent puts into a childcare account, the Government contributes £2, subject to the scheme limits.

Again, neither parent can normally have expected adjusted net income of more than £100,000 for the tax year. GOV.UK

So somebody with income around £100,000 needs to be particularly careful because crossing the threshold can have consequences beyond simply paying a little more Income Tax.

Child Benefit Uses a Different Limit

Child Benefit works differently.

For 2026/27, the High Income Child Benefit Charge starts where an individual has adjusted net income of more than £60,000 and they or their partner receive Child Benefit. GOV.UK

It is not based on the couple’s combined income.

Instead, where both partners have income above the threshold, the charge normally falls on the person with the higher adjusted net income. GOV.UK

So a couple where both partners earn £59,000 can receive Child Benefit without the High Income Child Benefit Charge applying.

But a household where one person earns £70,000 and the other earns £20,000 will potentially be affected.

What Happens Between £60,000 and £80,000?

The Child Benefit is gradually clawed back through the High Income Child Benefit Charge.

For the current rules, the charge increases by 1% of the Child Benefit received for every £200 of adjusted net income above £60,000.

Once adjusted net income reaches £80,000, the charge is equal to 100% of the Child Benefit received. GOV.UK

So, broadly:

£60,000 or below: no High Income Child Benefit Charge

£60,000 to £80,000: Child Benefit progressively clawed back

£80,000 or above: charge broadly equals the full amount of Child Benefit received

Technically, you can still claim Child Benefit. The issue is that some or all of it may effectively be recovered through the tax charge.

The Key Figure Is Adjusted Net Income

Both of these sets of rules use adjusted net income, rather than simply the salary figure on your employment contract.

Adjusted net income broadly starts with your taxable income from sources including:

• Employment
• Self-employment
• Dividends
• Rental income
• Savings interest
• Pension income
• Certain foreign income

Certain deductions are then made, including qualifying pension contributions and Gift Aid donations. GOV.UK

This creates legitimate tax-planning opportunities for people who are close to the relevant thresholds.

Can Pension Contributions Help?

Potentially, yes.

Pension contributions can reduce adjusted net income.

For example, suppose somebody expects their adjusted net income to be £110,000.

A sufficiently large qualifying pension contribution could potentially reduce their adjusted net income to £100,000 or below.

That could have several consequences.

It may help preserve eligibility for childcare support.

It may also restore some or all of the Personal Allowance that starts being withdrawn once adjusted net income exceeds £100,000.

HMRC’s calculation of adjusted net income specifically takes qualifying pension contributions into account. GOV.UK

What About Salary Sacrifice?

Pension salary sacrifice can also be useful.

Under a salary-sacrifice arrangement, an employee gives up part of their salary in exchange for an employer pension contribution.

Because the salary being sacrificed is no longer taxable pay, it can reduce adjusted net income.

HMRC confirms that salary sacrifice for pension contributions can reduce adjusted net income and therefore affect eligibility for things such as childcare support and other income-based tax thresholds. GOV.UK

But salary sacrifice needs to be arranged correctly with the employer.

You generally cannot wait until after the tax year has finished and retrospectively decide that salary already received should have been sacrificed.

Personal Pension Contributions Can Also Work

You do not necessarily need access to an employer salary-sacrifice scheme.

A contribution to a personal pension can also reduce adjusted net income.

Where a contribution is made under relief at source, the gross contribution is taken into account.

So, for example, if you personally pay £8,000 into a pension and the pension provider claims £2,000 basic-rate tax relief, the gross contribution is £10,000.

That £10,000 is generally the figure used when calculating the reduction to adjusted net income. GOV.UK

Timing Matters

If you are using pension contributions as part of tax planning, do not leave the calculation until after the tax year has ended.

For an individual contribution to affect a particular tax year, it needs to fall within that tax year.

So if you are approaching either the £60,000 Child Benefit threshold or the £100,000 childcare threshold, it is sensible to estimate your adjusted net income before 5 April.

That gives you time to consider whether a pension contribution or another legitimate adjustment is appropriate.

Don’t Just Look at Salary

This is another common mistake.

Someone may have a salary of £95,000 and assume they are comfortably below the £100,000 limit.

But they may also have:

£8,000 of dividends,

£5,000 of rental income,

or significant taxable benefits or investment income.

That additional income can push adjusted net income over the threshold.

Equally, somebody with gross income above £100,000 may ultimately have adjusted net income below £100,000 after qualifying pension contributions.

So the calculation needs to be done properly.

The £100,000 Threshold Can Be Particularly Expensive

The £100,000 level is already an important tax threshold because the Personal Allowance begins to be withdrawn once adjusted net income exceeds £100,000.

For every £2 of adjusted net income above £100,000, £1 of Personal Allowance is lost.

For parents who are also receiving childcare support, crossing £100,000 can therefore potentially have a much greater financial impact than the additional Income Tax alone.

That makes planning around this level particularly important.

The Bottom Line

The childcare and Child Benefit income limits are easy to confuse.

For eligible working-parent childcare support in England, each parent generally needs expected adjusted net income of £100,000 or less. GOV.UK

For Child Benefit, the High Income Child Benefit Charge starts when the higher earner’s adjusted net income exceeds £60,000, with the benefit effectively fully clawed back once adjusted net income reaches £80,000. GOV.UK

If your income is close to either threshold, don’t wait until after the end of the tax year.

Work out your expected adjusted net income in advance and consider whether legitimate planning such as pension contributions or salary sacrifice may be appropriate.

A little planning before 5 April can sometimes make a very significant difference.

This article is general information only. Childcare eligibility and pension planning depend on individual circumstances and other qualifying conditions, so specific advice should be taken where necessary.