Removing the Childcare Tax Cliff is fiscally positive for parents earning close to £100k

Fiscal impact (behaviour adjusted) of removing the Childcare Tax Cliff for a parent earning a particular Gross Income

In this case, the household is entitled to £18,480 of childcare and the parent endogenously choose whether to bunch their income at £100k. In this example, there are no frictions nor any utility from pension saving. For a parent who previously chose to bunch, the govt incurs no new childcare cost but does gain previously forgone tax revenue.
Source: Centre for British Progress analysisGet the dataCreated with Datawrapper