The £100,000 Tax Trap
Tax year 2026 / 27 Scope E/W/NI examples · Scotland in calculator Source GOV.UK · Reviewed 21 Apr 2026
Reference · For high-earning UK parents

Where a pay rise disappears, and a family can end up worse off.

Three unrelated tax and benefit rules compound on UK parents between £60,000 and £125,140. Each is ordinary. Together they produce effective marginal rates well above the headline 45%, and at one specific income — £100,000 — a cliff in childcare support that can make a raise leave you poorer. This 100k tax trap reference shows where the separate rules start, stop and overlap.

  1. 01 High Income Child Benefit Charge (HICBC) begins at £60,000 and fully withdraws Child Benefit by £80,000.UK-wide
  2. 02 Personal allowance taper removes £1 of the £12,570 allowance for every £2 above £100,000 — an effective 62% E/W/NI marginal rate.PA UK-wide
  3. 03 Childcare cliffs — Tax-Free Childcare and 30 funded hours end the moment either parent crosses £100,000. No taper.Binary
01The marginal rate

A 62% band, wedged between the 40% and 45% ones.

The chart tracks the effective marginal rate on each extra pound earned using England, Wales and Northern Ireland income tax bands. Move the marker to see how take-home, clawback and lost allowance change together. Above £100,000, each £2 of raise costs £1 of personal allowance — that’s the  20-point spike. The calculator models Scottish income tax separately.

Adjusted net income
£110,000
Marginal rate at this point
62%on next £1
Child Benefit lost (annual)
£2,337
Personal allowance remaining
£7,570
Children receiving Child Benefit
£40k £160k
Marginal rate on next £1
Effective rate incl. clawback
Child Benefit clawback
Shaded band · £100,000 – £125,140 taper
02Three distinct rules

They don’t talk to each other, but they arrive together.

Each rule was introduced separately and targets a different base. The trap is the interaction — and the fact that all three react to the same underlying figure: adjusted net income.

i.

High Income Child Benefit Charge

since 2013 · reformed 2024
Band £60,000 ——— £80,000

1% of annual Child Benefit is clawed back for every £200 of adjusted net income above £60,000. By £80,000, the charge equals the full benefit.

Assessed on the higher-earning partner’s individual income — not household. A couple on £59k each keeps everything; a single earner on £80k keeps nothing.

1 child £1,407/yr 2 children £2,337/yr 3 children £3,268/yr
ii.

Personal allowance taper

ITA 2007 s35 · unchanged since 2010
Band £100,000 ——— £125,140

For every £2 earned above £100,000, £1 of the £12,570 personal allowance is withdrawn. The allowance is fully gone by £125,140.

For England, Wales and Northern Ireland taxpayers, because that withdrawn pound is then taxed at 40%, the effective marginal rate on the whole band is 60%, rising to 62% once 2% employee NI is added. Scotland uses different income tax bands; model it in the calculator.

E/W/NI marginal 62% E/W/NI above 125k 47% PA taper UK-wide
iii.

Childcare cliffs

Tax-Free Childcare + 30 funded hours
Threshold £100,000 · binary

Tax-Free Childcare — up to £2,000 per child per year of government top-ups (£4,000 if disabled). Children up to 11 (16 if disabled). UK-wide.

30 funded hours — 30 hrs/week × 38 weeks of nursery or childminder time. Ages 9 months – 4. England. Typically worth ≈£10,000/yr per child in London.

Both stop the moment either parent crosses £100,000. No taper; no apportionment.

£99,999 keeps everything £100,001 keeps nothing
03The cliff at £100,000

£2 of extra salary can cost £12,000.

The childcare entitlements are not tapered. At £99,999 you qualify; at £100,001 you do not. For a London family with a toddler in nursery, the gap between those two salaries can be more than a year’s pension contribution.

At £99,999
£12,000
Tax-Free Childcare£2,000/yr
30 funded hours (London)≈ £10,000/yr
Personal allowance£12,570
At £100,001
£0
Tax-Free ChildcareNil
30 funded hoursNil
Personal allowanceTapering
A £2 pay rise · net change − £12,000 / year

A pay rise from £99,000 to £103,000 can leave a family materially worse off.

The new £4,000 straddles two bands — £1,000 at 42%, then £3,000 at ≈62% once the allowance taper bites. Of the roughly £1,700 that lands in the bank, the family has already lost up to £12,000 of childcare support.

The practical consequence is that the £100,000 threshold is not a point on a gradient — it’s a step. Most people who hit it only discover the shape of that step after the fact.

“£99,000 → £103,000 can make a family materially worse off.”
The inversion

Someone on £110,000 faces a higher marginal rate than someone on £150,000.

£110,000 earner
62%
40% income tax + 20% lost allowance + 2% employee NI. On every marginal £1 earned.
£150,000 earner
47%
45% additional rate + 2% employee NI. Allowance already gone; no further taper to absorb.
04Worked examples

Where a £25,000 raise actually goes.

Two views of the same band. The first traces a single £25k raise from £100,000 to £125,140. The second shows the annual tax and clawback cost for a parent of two at five points across that range.

A £25,000 raise · £100,000 → £125,000

Per year · no children assumed
LineAmount
Gross raise£25,000
Income tax at 40%−£10,000
Lost personal allowance × 40%−£5,000
Employee NI at 2%−£500
Disappears−£15,500
Take-home from the raise£9,500
Effective retained38p / £

Annual cost · tax + Child Benefit clawback (excl. NI), parent of two

Income tax + clawback · not NI · not childcare
IncomeTotal costMarginal band
£105,000£32,76962%
£110,000£35,76962%
£115,000£38,76962%
£120,000£41,76962%
£125,000£44,76962%
05Reducing exposure

What moves the needle is adjusted net income.

Not salary. Not take-home. It’s total taxable income less specific reliefs — and all three rules key off it. Anything that reduces the number reduces exposure to all three at once. This is reference, not personal advice.

01 · Pension

Pension contributions reduce your adjusted net income £-for-£.

Crossing below £100,000 restores the full personal allowance and childcare entitlements. Crossing below £60,000 avoids the Child Benefit clawback entirely. Salary sacrifice is often the cleanest route — it saves employee NI as well.

02 · Gift Aid

Charitable donations, grossed up.

Gift Aid donations are added back at the gross amount (£1 donated becomes £1.25 of ANI relief). Useful for smaller, lumpier adjustments in years with bonus overshoots.

03 · Adjusted net income

The figure that matters.

Total taxable income from all sources — salary, bonus, dividends, savings interest — less reliefs: gross pension contributions, Gift Aid, trading losses. Calculate it first; all three rules follow from it.

The £100,000 Tax Trap
Tax year2026 / 27 ScopeE/W/NI · Scotland in calc SourceGOV.UK · Reviewed 21 Apr 2026
Reference · UK high-earning parents

Where a pay rise disappears, and a family ends up worse off.

Three unrelated tax and benefit rules compound on UK parents between £60,000 and £125,140. Each is ordinary. Together they produce effective marginal rates well above the headline 45% — and at £100,000, a cliff in childcare support that can make a raise leave you poorer.

Headline impact · Parent of three at £125,140
−£18,300
Combined annual cost of the taper, the Child Benefit clawback, and lost childcare support for a London family with one child under five.
Tax + clawback
≈ £8,300
Lost childcare
≈ £10,000
  1. 01 High Income Child Benefit Charge begins at £60,000 and fully withdraws Child Benefit by £80,000.UK-wide
  2. 02 Personal allowance taper removes £1 of the £12,570 allowance for every £2 above £100,000 — an effective 62% E/W/NI marginal rate.PA UK-wide
  3. 03 Childcare cliffs — Tax-Free Childcare and 30 funded hours end the moment either parent crosses £100,000. No taper.Binary
01The marginal rate

A 62% band, wedged between 40% and 45%.

Drag the slider to see how take-home, clawback and lost allowance change together. Above £100,000, each £2 of raise costs £1 of personal allowance — that's the 20-point spike.

Adjusted net income
£110,000
Marginal rate
62%on next £1
CB clawback / yr
£2,337
Allowance left
£7,570
£40k£100k£160k
Children receiving Child Benefit
Marginal rate
Incl. clawback
02Three distinct rules

They don't talk to each other, but they arrive together.

Each rule was introduced separately and targets a different base. The trap is the interaction — and that all three react to the same figure: adjusted net income.

i.

High Income Child Benefit Charge

since 2013 · reformed 2024
Band £60k — £80k

1% of annual Child Benefit is clawed back for every £200 above £60,000. By £80,000, the charge equals the full benefit.

Assessed on the higher-earning partner's individual income — not household. Two parents on £59k each keep everything; a single earner on £80k keeps nothing.

1 child £1,407 2 children £2,337 3 children £3,268
ii.

Personal allowance taper

ITA 2007 s35 · since 2010
Band £100k — £125,140

For every £2 above £100,000, £1 of the £12,570 personal allowance is withdrawn. Fully gone by £125,140.

That withdrawn pound is then taxed at 40%, so the effective marginal rate is 60%, rising to 62% with 2% NI. Scotland's bands differ — model in calculator.

E/W/NI marg 62% Above 125k 47%
iii.

Childcare cliffs

TFC + 30 funded hours
Threshold £100k · binary

Tax-Free Childcare — up to £2,000 / child / year of top-ups (£4,000 if disabled). Children up to 11.

30 funded hours — 30 hrs × 38 wks of nursery time, ages 9 mo – 4. England. Worth ≈ £10,000/yr per child in London.

Both stop the moment either parent crosses £100,000. No taper.

£99,999 all of it £100,001 none
03The cliff at £100,000

£2 of extra salary can cost £12,000.

Childcare entitlements aren't tapered. At £99,999 you qualify; at £100,001 you don't. For a London family with a toddler in nursery, that gap can exceed a year's pension contribution.

At £99,999
£12,000
Tax-Free Childcare£2,000/yr
30 funded hours (London)≈ £10,000/yr
Personal allowance£12,570
A £2 raise −£12,000 / yr
At £100,001
£0
Tax-Free ChildcareNil
30 funded hoursNil
Personal allowanceTapering

A pay rise from £99,000 to £103,000 can leave a family materially worse off.

The new £4,000 straddles two bands — £1,000 at 42%, then £3,000 at ≈62% once the taper bites. Of the roughly £1,700 that lands in the bank, the family has already lost up to £12,000 of childcare support.

The £100,000 threshold isn't a point on a gradient — it's a step. Most people only discover its shape after the fact.

"£99,000 → £103,000 can make a family materially worse off."
The inversion

Someone on £110,000 faces a higher marginal rate than someone on £150,000.

£110k earner
62%
40% IT + 20% lost allowance + 2% NI on every marginal £1.
£150k earner
47%
45% additional rate + 2% NI. Allowance already gone.
05Worked examples

Where a £25,000 raise actually goes.

First, a single £25k raise from £100k to £125,140. Then the annual cost for a parent of two across the band.

A £25,000 raise · £100k → £125k

Per year · no children assumed
Gross raise£25,000
Income tax at 40%−£10,000
Lost allowance × 40%−£5,000
Employee NI at 2%−£500
Disappears−£15,500
Take-home£9,500
Effective retained38p / £

Annual cost · tax + clawback (excl. NI)

Parent of two · swipe to see all →
IncomeTotal costMarg.
£105,000£32,76962%
£110,000£35,76962%
£115,000£38,76962%
£120,000£41,76962%
£125,000£44,76962%
06Reducing exposure

What moves the needle is adjusted net income.

Not salary. Not take-home. All three rules key off it. Anything that reduces the number reduces exposure to all three at once. Reference, not personal advice.

01
Pension

Pension contributions reduce ANI £-for-£.

Crossing below £100,000 restores the full personal allowance and childcare entitlements. Crossing below £60,000 avoids the Child Benefit clawback. Salary sacrifice is often cleanest — saves NI too.

02
Gift Aid

Charitable donations, grossed up.

Gift Aid donations are added back at gross (£1 → £1.25 of ANI relief). Useful for smaller, lumpier adjustments in years with bonus overshoots.

03
Adjusted net income

The figure that matters.

Total taxable income from all sources — salary, bonus, dividends, savings interest — less reliefs: gross pension, Gift Aid, trading losses. Calculate it first.