England, 2026/27
The £100k cliff: when a raise costs you money
Crossing £100,000 of adjusted net income can remove your childcare support in one step, not gradually. Model a single raise to see the real effective rate.
Scotland uses its own income tax bands; NI is UK-wide
Before the raise being modelled
The increase you're considering, or already have
Annual amount, lowers your adjusted net income
0 if you don't have a partner, or they don't earn
Models one qualifying child. With more than one, your real childcare value is higher than shown here.
30 for the working-parents entitlement
38 for term-time only
Result
- Adjusted net income before
- £99,000
- Adjusted net income after
- £101,000
- Childcare support before
- £12,437
- Childcare support after
- £0
-£11,477 change in disposable income
On these numbers, this raise leaves you with less disposable income overall -- the lost childcare support would largely account for this.
On these numbers, an extra £1,010 into a pension would bring adjusted net income back to £100,000, leaving £12,052 better off.
Why £100,000 is a cliff edge, not a slope
Most of the tax system tapers gradually. The £100,000 childcare threshold does not: 30 funded hours a week and Tax-Free Childcare are available in full right up to £100,000 of adjusted net income, then withdrawn completely the moment either parent goes a single pound over. For a parent with a young child receiving the full working-parents entitlement, that can be worth several thousand pounds a year, lost all at once. This models that core income cliff; it does not separately account for each parent’s minimum-hours earnings requirement, or the 15 universal hours for 3 and 4 year-olds that are not income-tested.
A pay rise that crosses this threshold is also taxed at 40% income tax and may sit inside the personal-allowance taper band as well, so the lost childcare stacks on top of ordinary higher-rate tax. The combined effect is an effective marginal rate that can exceed 60%, or considerably more once the childcare loss is included, for that slice of income alone.
The most common approach is pension salary sacrifice: sacrificing enough to bring adjusted net income back to £100,000 restores the childcare support exactly as it was. This tool shows whether that trade is worth it for your numbers.
This is a generic illustration. It is not financial, tax, or investment advice and does not account for your full circumstances.