The £100k childcare cliff: how £1 of pay can cost you £8,000

The personal allowance taper is at least gradual. Childcare support is not: the moment either parent’s adjusted net income hits £100,001, two things vanish in full —

Tax-Free Childcare: the government’s 20% top-up on childcare costs, worth up to £2,000 per child per year.
The working-parent free hours (30 hours a week in England): for a family otherwise paying for those hours, commonly worth £5,000–£8,000 a year per child in nursery fees.

There is no taper. £100,000 keeps everything; £100,001 loses everything. For a parent of two with £15,000 of annual nursery costs, that single pound of extra pay costs around £8,000 a year — a marginal tax rate of roughly 800,000% on the pound that crossed the line.

Why pay rises can make you poorer

Because the cliff sits on top of the 60% taper, a parent crossing £100k doesn’t just lose childcare support — they’re also in the worst income-tax zone in the UK. The combined effect means a family can accept a £10,000 pay rise and end up thousands of pounds worse off in cash and benefits. It also distorts behaviour: parents decline promotions, cut hours, or stuff bonuses into pensions specifically to stay under the line. The last one is usually the right answer.

The tests that matter

The £100,000 test is on adjusted net income (ANI), not gross salary — pension contributions reduce it, whichever type you pay. It also includes taxable benefits in kind: a company car or private medical cover can quietly put a £96,000 salary over the line. Check your P11D (or your tax code — a reduced allowance is the giveaway) and put the value in the calculator.
Both parents are tested for childcare support. If your partner is over £100k, your own sacrifice can’t restore it.
The nations differ: England and Wales share the cliff; Scotland’s funded hours are universal (only Tax-Free Childcare is at stake); Northern Ireland has no 30-hours scheme. The Scottish guide covers the differences.
The child benefit charge is a separate, earlier trap at £60k–£80k.

The fix: pension contributions

ANI falls £1 for every £1 of gross pension contribution. A parent on £110,000 who contributes £10,000 restores the free hours and Tax-Free Childcare and the personal allowance, while getting higher-rate relief on the whole contribution. In most real cases the family ends up better off in cash today — plus £10,000 in the pension. The calculator calls this “getting paid to save”, because it is.

If the excess arrives as a bonus, sacrifice the bonus before it’s paid. If your childcare years are ending soon, remember the cliff is annual — a one-off spike year (vesting shares, a big bonus) can be smoothed with a one-off pension contribution.

The calculator below is preloaded with the classic case: £110,000, two children, £15,000 of childcare. Adjust it to your own numbers to see your cliff and the exact contribution that clears it.

Try your own numbers

About you

Where you liveSets tax bands and childcare rulesGross salaryAnnual pay before tax or any deductions — the headline figure on your contract, not what lands in your bankTaxable benefits in kindP11D value: company car, private medical… Counts towards the £100k tests. 0 if noneVariable bonus (maximum)The most you might get this year if targets are hit. 0 if nonePension contributionGross annual amount landing in the pensionHow it's paidAlso saves NI and student loan — the cheapest routeStudent loanPostgraduate loan

Your household

Partner with incomeChildrenAnnual childcare spendWith registered providersValue of 30 free hoursWhat you'd pay without them

Which student loan plan am I on?

It depends on where you lived when you took the loan out, and when your course started:

Northern Ireland — always Plan 1, whatever the year.
Scotland — always Plan 4 (loans applied for through SAAS).
England — Plan 1 before Sept 2012, Plan 2 from 2012 to July 2023, Plan 5 from Aug 2023.
Wales — Plan 1 before Sept 2012, Plan 2 after (Wales doesn't use Plan 5).
Postgraduate loan — English or Welsh master's/doctoral loans only; it repays alongside your main plan. Scottish and NI postgrad loans repay through Plan 4 / Plan 1 instead.

Still unsure? Your repayment plan is shown when you sign in to your student loan account on gov.uk.

The fix

Sacrifice £10,000 into your pension

That clears the trap and leaves you £4,200 a year better off in cash and benefits — plus £10,000 in your pension. You get paid to save. On the payslip that's about £317 a month less take-home, with £833 a month landing in your pension — the childcare support and child benefit come back separately.

Kept value = take-home pay + child benefit kept + childcare support with no pension contribution, for your household in England, 2026/27 tax year. Contributing moves you left; salary sacrifice lands exactly on the curve, net-pay and relief-at-source land slightly off it (NI and student loans don't fall).

Per year	No pension
Take-home pay	£72,357
≈ per month	£6,030
Income tax	£33,432 £2,786/mo
Employee NI	£4,211 £351/mo
Child benefit kept	£0
Childcare support	£0
Total kept value	£72,357

More guides

The 60% tax trap: why £100k–£125k is the worst place to earn

Between £100,000 and £125,140 the personal allowance taper pushes your real marginal rate to 62% — or 69.5% in Scotland. Here's the mechanics and the fix.

Keep your child benefit: beating the £60k–£80k charge

The High Income Child Benefit Charge claws back 1% of your child benefit per £200 over £60,000. What it's worth, who's tested, and how salary sacrifice keeps it.

Bonus sacrifice: turn a 62%-taxed bonus into pension at full value

A bonus that lands in the £100k–£125k zone keeps you 38p in the pound — or less with children. Exchanging it into your pension before payday keeps 100p.

Student loans and the tax traps: the 51%–71% graduate rates

Plan 1, 2, 4, 5 and postgraduate loans add 6–15% to your marginal rate — and they stack with the child benefit charge and the 60% taper. The 2026/27 thresholds and what actually reduces them.

Scotland's £100k trap: 69.5% marginal tax, but no childcare cliff

Scottish taxpayers face a harsher personal allowance taper — 67.5% plus NI — but Scotland's universal funded hours mean the £100k childcare cliff is much shallower. The 2026/27 bands and what changes.

2026/27 tax year, childcare with registered providers. Your nation sets the income tax bands (Scotland's six-band schedule vs rUK) and the childcare rules: England and Wales lose free hours over £100k, Scotland's funded hours are universal, Northern Ireland has Tax-Free Childcare only. Child benefit is charged on the household's higher earner, and childcare support needs both parents under £100k. This is a modelling tool, not financial advice — check your own position with HMRC or an adviser.