1. Name the childcare scheme first
Tax-Free Childcare adds £2 for each £8 paid into the childcare account, subject to a top-up cap of £500 every three months per child, or £1,000 for a disabled child. These are maximum top-ups, not a promise that every eligible household receives £2,000 or £4,000 each year. Actual childcare spending and eligibility affect the amount. How Tax-Free Childcare works
Free Childcare for Working Parents in England is a separate offer for eligible children aged nine months to four years. Its upper-income condition also checks each partner's expected adjusted net income against £100,000. Do not describe England's offer as a UK-wide entitlement. England scheme overview · England eligibility
Child Benefit and its High Income Child Benefit Charge use a different framework. Read the Child Benefit guide if that is the payment you mean. Keeping scheme names separate prevents an accurate tax calculation being applied to the wrong benefit.
2. Make one income schedule per partner
Use separate columns for you and your partner. Start with expected taxable employment income for the whole year: pay already received plus the remaining expected pay, bonuses and taxable employment benefits. Then consider other taxable income, including interest, dividends, property income, pensions and relevant foreign income. The official childcare test expressly includes foreign income; check its treatment rather than omitting it because it was received abroad. HMRC: childcare income condition
HMRC defines adjusted net income as taxable income before Personal Allowances, less specified reliefs. Its steps include grossed-up qualifying pension contributions and Gift Aid. Salary alone is therefore an incomplete starting point. HMRC adjusted net income steps
Use the taxable employment figure after any valid salary sacrifice or net-pay pension reduction already reflected in it. Do not subtract the same reduction again. For each pension line, record whether it has already reduced your starting income or is a separate relief-at-source payment. The pension relief guide explains the difference between net cash and gross contribution.
Savings or dividend allowances can make the tax on some income zero without removing that income from the adjusted-net-income calculation. ISA income is a different case because it is tax-free. GOV.UK: ISA tax treatment If an unusual payment is material, establish its tax treatment rather than classifying it from its bank-statement description.
3. Gross up the deductions that require it
Where your provider adds 20% basic-rate relief, an £800 personal contribution represents £1,000 gross. The same 1.25 gross-up applies to qualifying Gift Aid cash donations for this calculation. Distinguish these adjustments from ordinary spending: a mortgage payment or nursery bill is not an adjusted-net-income deduction.
HMRC's technical childcare manual confirms that the declaration concerns expected adjusted net income in the tax year containing that declaration. It also distinguishes that figure from gross income and earnings. This is why the annual forecast and the declaration date both deserve attention. HMRC childcare technical guidance
Three worked checks for 2026/27
These are algebraic adjusted-net-income examples, applicable to the upper-income test. They assume the listed payments qualify, sufficient pension-relief capacity, no other income or adjustments, and that neither contribution has already been deducted in the employment figure. They do not establish complete childcare eligibility.
Example 1: £98,500 salary is not the whole picture
Worked example
One parent expects taxable employment income of £98,500, a £3,000 bonus and £700 taxable savings interest. Total relevant income is £102,200. A relief-at-source payment of £1,760 cash becomes £2,200 gross.
£102,200 minus £2,200 gives £100,000 adjusted net income. That meets this upper-income condition because it is not over £100,000. Without the pension payment, the £98,500 headline salary would conceal an income-test problem.
Example 2: household income of £190,000
Worked example
Two partners each expect £95,000 adjusted net income. Their combined figure is £190,000, but neither individual exceeds £100,000. The upper-income condition is met for each. This does not bypass work, residence, child-age or other scheme requirements.
Contrast a couple with £105,000 and £25,000 respectively. Their combined £130,000 is lower, but one partner exceeds the individual ceiling. Averaging the two incomes would give the wrong answer.
Example 3: avoid deducting salary sacrifice twice
Worked example
An employee's contractual salary is £110,000. A valid £12,000 salary sacrifice means expected taxable employment pay is £98,000. Add £1,500 taxable interest and adjusted net income is £99,500, assuming no further adjustments.
The answer is not £87,500. Subtracting the £12,000 again would count the same pension arrangement twice. The relevant starting employment figure already reflects it. HMRC: salary sacrifice and pension contributions
4. Turn the estimate into an ongoing check
Keep dated evidence supporting your forecast: payslips, bonus information, benefit details, interest estimates and pension records. Update the schedule when a material fact changes. If you are relying on a one-off contribution, check the provider's payment-processing deadline and confirm what tax year the contribution belongs to.
Reconfirm your Tax-Free Childcare details every three months. Account confirmation rules When reconfirming, answer using a reasonable current forecast rather than last month's ordinary pay. If an unexpected payment changes circumstances or an earlier declaration may be wrong, use the childcare-account guidance or contact HMRC. A planned pension top-up is not a blanket assurance that an earlier declaration or missed application deadline has been repaired.
Run both partners through the adjusted-net-income calculator. Use it to check the arithmetic and identify omitted inputs. Then check the official scheme eligibility page: the calculator does not know your child's circumstances or approve a childcare account.
Common questions
Is £100,000 itself disqualifying?
The official upper-income condition says over £100,000. Exactly £100,000 does not exceed it. A small buffer can make your forecast less sensitive to unknown income, but it does not replace accurate records.
Can a pension payment help?
A qualifying contribution can reduce adjusted net income. Its cash requirement, gross amount, tax year and pension limits still need checking. Do not treat the amount added to a pension as cash available to pay nursery fees.
Does passing this check guarantee the funded hours?
No. Application timing and other scheme conditions still matter. England's working-parent offer and Tax-Free Childcare have separate practical rules, even where the same income figure is relevant.
Sources
Primary references checked 24 October 2026.