Free Childcare for Working Parents creates enormous discontinuities in the tax system

Effective Marginal Tax Rate vs Gross Income

This example is for a household based in London with one very young child. The value of the childcare benefit is £18,480. This is the cost to the government of providing Free Childcare for Working Parents to a child born in the first half of 2024, in Westminster in 2025/26 and of providing £2000 of annual Tax-Free Childcare spending.
Source: Centre for British Progress analysisGet the dataCreated with Datawrapper