Who is eligible for Tax-Free Childcare, and what does the £100,000 income rule mean?
By Katharine, Founder, EMBR Tax
Last updated for the 2026/27 tax year · 6 April 2026
How does Tax-Free Childcare work?
Tax-Free Childcare sounds simple on the surface, but the eligibility rules can catch people out. If you or your partner are close to £100,000 adjusted net income, it is one of the most important areas to check properly.
The scheme pays £2 for every £8 you pay into the account, up to the usual annual limit per child. But the income rules matter, and they are based on expected adjusted net income rather than salary alone.
What is the income rule that matters most?
If you or your partner expect adjusted net income over £100,000 in the current tax year, you are not eligible for Tax-Free Childcare. That is why even a relatively small amount over the line can matter.
Why do people get caught out by the eligibility rules?
- They focus on salary instead of adjusted net income
- Bonuses and other income can push them over without much warning
- They do not realise pensions or Gift Aid may affect the figure HMRC uses
What is the bottom line?
If your household is anywhere near £100,000 adjusted net income, do not assume Tax-Free Childcare will still be available. Check the expected figure carefully and review any steps that might change the position.
Frequently asked questions
How does Tax-Free Childcare work?+
The scheme pays £2 for every £8 you pay into the account, up to the usual annual limit per child. The income rules are based on expected adjusted net income rather than salary alone.
What is the income limit for Tax-Free Childcare?+
If you or your partner expect adjusted net income over £100,000 in the current tax year, you are not eligible for Tax-Free Childcare.
Why do people get caught out by the Tax-Free Childcare income rule?+
They focus on salary instead of adjusted net income. Bonuses and other income can push them over without much warning. They also do not realise that pensions or Gift Aid may affect the figure HMRC uses.
Related guides
- What is adjusted net income, and why does it matter for your tax and childcare?
Adjusted net income explained: what counts, what can reduce it, and why it affects your tax, Personal Allowance, and childcare support.
- What is the income rule for 30 hours free childcare, and could it affect your household?
The 30 hours scheme has a hidden income rule. If adjusted net income exceeds £100,000, either parent can make the whole household ineligible.
- Can salary sacrifice reduce your adjusted net income and improve childcare eligibility?
Salary sacrifice may reduce adjusted net income and improve eligibility for Tax-Free Childcare and 30 hours free childcare. Here is what to check.