A new analysis by the Centre for the Analysis of Taxation (CenTax) projects that families artificially suppressing earnings to stay under the £100,000 free‑childcare threshold could rise from roughly 1,000 in 2022 to almost 12,000 by 2030, a ten‑fold increase that may intensify work‑hour reductions and labour‑market inefficiencies.

What the CenTax report says

The Guardian article of 10 September 2026, which quotes the CenTax report, confirms that about 1,000 families were identified in 2022 as "bunching" just below the £100,000 income ceiling to retain entitlement to 30 hours of free childcare per week. The same source states that the projection for the end of the current parliament in 2030 is "almost 12,000 families".

The report also notes that, under the projected scenario, a parent would need to earn £124,000 in 2030 to be no worse off after losing the entitlement. This figure reflects the income level at which the benefit of free childcare disappears, according to the same Guardian coverage.

Labour‑market implications

The CenTax analysis links the "bunching" behaviour to potential reductions in labour supply. By keeping earnings just below the threshold, families may cut working hours or withdraw from the labour market altogether to avoid losing free childcare. The Guardian report highlights that the phenomenon is already visible among non‑working mothers: 9 % of non‑working mothers are above the £100,000 threshold, compared with 6 % below it.

If the projected rise to 12,000 families materialises, the aggregate loss of working hours could be significant, although the report does not quantify the exact number of hours lost. The implication is that higher‑earning households might deliberately limit their income, thereby reducing overall productivity and tax receipts.

Political context and policy debate

The timing of the report coincides with Chancellor John Healey’s preparation of the October 2026 budget. The Guardian article notes that Healey has been urged to address the "£100k childcare ‘cliff edge'" that prompts parents to cut work. The political pressure stems from the fact that the free‑childcare entitlement was expanded in 2024, widening the pool of families eligible for 30 hours of care, but also creating a sharp cut‑off at £100,000.

Critics argue that the cliff edge creates a distortion in labour‑market decisions, while supporters of the current design point to the fiscal cost of extending free childcare to higher‑income families. The CenTax report does not take a position on the policy but provides the behavioural evidence that fuels the debate.

What remains unknown

The CenTax projection is based on trends observed up to 2022; the report does not disclose the modelling assumptions that generate the 2030 figure. It also does not specify how many hours each affected family is expected to cut, nor the regional distribution of the phenomenon. The Guardian article does not provide data on the total number of families eligible for free childcare, which would help contextualise the projected 12,000 families.

Furthermore, the analysis does not address how potential policy changes—such as raising the income threshold or smoothing the benefit reduction—might alter the projected numbers. As the budget approaches, the extent to which the government will act on the CenTax findings remains uncertain.

In sum, the CenTax estimate, as reported by The Guardian, signals a possible ten‑fold increase in families curbing earnings to retain free childcare. The projection raises questions about the efficiency of the current threshold and its impact on labour‑market participation, especially among higher‑earning parents.