The £100k tax trap
The £100k tax trap is costing parents thousands in childcare
General guidance · Not financial advice
- Keep as little as 40p per £1 earned
- Lose £2,000+ per child in support
- Miss out on thousands in free childcare
Check in 30 seconds: Could salary sacrifice be worth a small financial trade-off to your take-home today or even increase the cash in your pocket for a much larger pension.
Where you stand today
Without changing anything.
Total taxable income
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Take-home pay
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Same income. Two outcomes.
Same gross compensation. The only thing that changes is where the money goes. Illustrative figures based on the inputs above — for general guidance only, not a personal recommendation.
✗If you do nothing
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cash to spend this year
- Take-home pay—
- − Childcare bill—
- = Cash left to spend—
- Into pension this year—
✓If you sacrifice £0
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cash to spend this year
- Take-home pay—
- − Childcare bill—
- = Cash left to spend—
- Into pension this year—
The decision
Move the slider above to see the trade-off.
Why £100k is such a brutal cliff
For most income levels, UK tax increases gradually. But at £100k, three things happen at once:
- Your personal allowance is removed — £1 of allowance lost for every £2 you earn over £100k
- Your marginal tax rate jumps to ~60% (40% + 20% from the lost allowance)
- Parents lose Tax-Free Childcare (up to £2,000/child) and the income-tested 15/30 free hours (worth thousands per child)
Earning £105k can leave you worse off than £99k — for years, while your kids are in nursery.
£0 – £50,270
28%
20% income tax + 8% NI
£50,270 – £100,000
42%
40% income tax + 2% NI
£100,000 – £125,140
62%
+ losing personal allowance + losing childcare benefits
Above £125,140
47%
45% income tax + 2% NI
Per-child childcare breakdown
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Tax year at a glance (April–March)
Take-home cash already accounts for childcare. When fees shift mid-year (e.g. starting school in September), you'll see the change here.
Move the slider above 0 to see the monthly view.
Got your numbers?
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Pension Opportunity Insight
What your sacrifice grows into
Money in a pension doesn't sit still. It compounds. Over 20–30 years, even a modest annual contribution can grow into a meaningful retirement pot. Use the calculator below to see what happens to your contribution over time, then compare the platforms most UK earners use.
Compound growth calculator
Conservative assumption: most diversified pension portfolios have averaged 4–7% real (after inflation) returns over the long term. Past performance is not a guarantee of future returns.
Total contributions
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Compound growth
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Pension pot at retirement
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Your contributions
Compound growth on top
Top UK SIPP providers — fee comparison
Most £100k+ earners self-direct via a SIPP (Self-Invested Personal Pension). The right platform depends on pot size and how active you are. Fees compound too — a 0.30 percentage-point platform fee gap costs ~£25k+ over 25 years on a £35k/year contribution.
| Provider | Platform fee | Min contribution | Best for | |
|---|---|---|---|---|
| InvestEngine SIPP | 0% platform | £100 lump | Cheapest option; ETFs only | Visit |
| Vanguard Investor | 0.15% (capped £375/yr) | £100/mo | Simple, low-cost index funds | Visit |
| AJ Bell SIPP | 0.25% (£10/yr min) | £25/mo | Wide investment choice | Visit |
| Interactive Investor | £12.99/mo flat | £25/mo | Larger pots (£50k+) — flat fee wins | Visit |
| Hargreaves Lansdown | 0.45% (capped £200/yr on funds) | £25/mo | Premium service, premium fees | Visit |
Fees and features as of November 2025 — confirm with each provider before opening an account. This page may include affiliate links — if you open an account via one of these we may earn a small commission at no cost to you. We don't recommend a specific provider; the right one depends on your pot size, investment style, and how often you trade.
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