What you lose at £100,000, per child
Tax-Free Childcare
Up to £2,000/child
£4,000 for a disabled child, per year
30 hours free childcare
£4,500–£6,500/child
For a 2-4 year old, full-time nursery, per year
Personal Allowance taper
60% marginal rate
On income between £100,000 and £125,140
Cross £100,000 in adjusted net income by even a single pound, and two separate childcare benefits disappear at once: Tax-Free Childcare (worth up to £2,000 a year per child) and the 30 hours free childcare entitlement (worth roughly £4,500 to £6,500 a year per child in full-time nursery). Unlike the 60% tax trap, which tapers gradually, this is a hard cliff edge with no sliding scale.
For a parent with one child in nursery, that is a £6,500+ hit stacked directly on top of the Personal Allowance taper, at exactly the same £100,000 line. Here is how the cliff actually works, and the one lever, pension salary sacrifice, that most parents in this position use to pull their adjusted net income back under it.
See how much of a £100k+ salary you actually keep, tax and NI included.
Open the calculatorWhat is "adjusted net income", and why it's not just your salary
Both the childcare cliff and the Personal Allowance taper are tested against adjusted net income, not your headline salary. Adjusted net income starts from your total taxable income, salary, bonus, and any benefits in kind, then subtracts gross pension contributions and Gift Aid donations. A £95,000 salary with a £8,000 bonus and no pension contribution has an adjusted net income of £103,000, over the line, even though the base salary alone looks safely under £100,000.
This is why the test catches people out: a bonus, a benefit in kind, or simply not checking the combined figure can tip a household over the threshold without anyone realising until Tax-Free Childcare payments stop or the nursery bill jumps because the 30 hours entitlement has quietly disappeared.
Worked Example: £110,000 Salary, One Child in Nursery
No pension contribution, single earner, 2026/27 rules.
Gross salary One child in full-time nursery | £110,000 |
Adjusted net income No pension contribution yet | £110,000 |
Tax-Free Childcare eligibility Adjusted net income over £100,000 | Lost |
30 hours free childcare Drops to the universal 15 hours | Lost |
Annual cost of losing both Depending on nursery fees and child's age | −£6,500 to −£8,500 |
The Fix: Pension Salary Sacrifice
Same £110,000 salary, sacrificing enough into a pension to land under £100,000.
Gross salary | £110,000 |
Pension salary sacrifice Brings adjusted net income to £99,900 | −£10,100 |
Adjusted net income Under the £100,000 line | £99,900 |
Take-home pay given up Cash in pocket this year, before pension growth | −£3,858 |
Childcare support restored Tax-Free Childcare and 30 hours, per child | £6,500 to £8,500+ |
The trade is usually worth it with children in nursery. Giving up £3,858 in take-home cash to restore £6,500+ in childcare support is a net win before even counting the pension growth on the sacrificed amount. With no children in paid childcare, the calculation changes, since only the 60% tax-trap saving applies, not the childcare cliff.
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Common Questions About the Childcare Cliff
What happens if I earn just over £100,000 with a young child in the UK?
You lose Tax-Free Childcare (worth up to £2,000 a year per child, £4,000 for a disabled child) and the 30 hours free childcare entitlement for 3 and 4 year olds (worth roughly £4,500 to £6,500 a year per child in full-time nursery), the moment your adjusted net income crosses £100,000. Unlike the Personal Allowance taper, this is not gradual: there is no sliding scale, you either qualify or you do not. A single pound over the line and both benefits stop in one go, on top of the 60% marginal tax rate that also kicks in at the same threshold.
Is the £100,000 childcare threshold the same as the tax trap threshold?
Yes, both tests use the same £100,000 adjusted net income figure, which is why the two effects compound rather than being separate problems. A parent earning £105,000 with two young children in nursery is simultaneously losing 60p of every extra pound to the Personal Allowance taper and losing thousands of pounds in childcare support that families earning £95,000 still receive. The tax trap alone is bad; combined with the childcare cliff, it is often the single most expensive salary band in the UK system.
Does a pension salary sacrifice actually restore my childcare eligibility?
Yes. Adjusted net income is calculated after deducting qualifying pension contributions (via salary sacrifice or relief-at-source), Gift Aid donations, and trading losses. On a £110,000 salary, sacrificing £10,100 into a pension brings adjusted net income down to £99,900, restoring both Tax-Free Childcare and the 30 hours entitlement. You give up £3,858 in take-home cash this year to do it, but for a family with one child in full-time nursery, that trade is usually worth it: the childcare support alone is worth £6,500 or more a year, before counting the pension growth on the sacrificed amount itself.
Does this apply per household or per parent?
Per parent, individually, not combined. A household where each parent earns £90,000 (£180,000 combined) keeps full eligibility, because neither parent individually crosses £100,000. A single-earner household on £100,001, with a partner earning nothing, loses everything. This is a common source of confusion: the test is deliberately about each parent's own adjusted net income, not the family's total income.
What other ways are there to reduce adjusted net income besides pension contributions?
Gift Aid donations reduce adjusted net income by their grossed-up value, and trading losses (for the self-employed) also count. For most PAYE employees, pension salary sacrifice is the most practical lever, since it is straightforward to arrange through payroll and the sacrificed amount still belongs to you, just inside a pension rather than your take-home pay. An EV salary sacrifice scheme reduces gross pay too, though by a smaller amount and it doesn't build a retirement pot the way a pension contribution does.
How do I know my exact adjusted net income, not just my salary?
Adjusted net income starts from your total taxable income (salary, bonus, benefits in kind, rental or investment income) and then subtracts gross pension contributions and Gift Aid. A £105,000 salary with a £6,000 bonus and no pension contribution gives an adjusted net income of £111,000, comfortably over the line even though the base salary alone looks closer to £100,000. Anyone near the threshold should calculate the full figure, not just their base salary, before assuming they are safe.