Fiscal drag will pull 55,000 working parents into Jeremy Hunt’s childcare tax trap over the next five years, analysis by the Centre for Economics and Business Research (CEBR) shows.

The number of parents who will find it harder to go back to work or will be incentivised to keep their salaries low will swell by 71pc, in a process known as fiscal drag.

Jeremy Hunt, the Chancellor, used his Spring Budget to extend 30 hours of free childcare to all working families with toddlers over nine months old. However, this support is removed when one parent earns over £100,000 – also the threshold when they start to lose their personal tax-free allowance.

The combined cliff edge of support means that a parent with two small children will be worse off if they are earning £134,500 than if they were earning £99,000, according to the Institute for Fiscal Studies.

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