What £109,000 costs you at the trap
| At £109,000 | |
|---|---|
| Take-home a year | £71,977 |
| Take-home a month | £5,998 |
| Personal allowance left | £8,070 (of £12,570) |
| Allowance withdrawn | £4,500 |
| Marginal rate on the next £1 | 62% |
| Tax-Free Childcare at risk (2 children) | £4,000 a year |
| Pension to get back under £100k | £9,000 |
The personal allowance falls by £1 for every £2 of income above £100,000, which is why £109,000 keeps only £8,070 of the £12,570 allowance. The allowance is gone completely at £125,140, and above that the 62% band ends and the rate settles to 47%.
The pension contribution that undoes the trap
Adjusted net income is income after gross pension contributions, so paying £9,000 into a pension brings it back to £100,000. That restores the full £12,570 allowance and the childcare support, and because relief in this band is worth 60%, the £9,000 contribution costs about £3,420 in take-home while the whole £9,000 goes into your pension. Under salary sacrifice, take-home lands at about £68,557. The adjusted net income calculator and the pension contribution calculator show the exact figure.
The childcare cliff at £100,000
Crossing £100,000 of adjusted net income removes two things at once, and the loss is a cliff rather than a taper:
- Tax-Free Childcare, worth up to £2,000 a child a year (£4,000 for two), stops. Source: gov.uk.
- The funded 30 hours of childcare for a child aged 9 months to 4 years, in England, stops. Source: gov.uk. Wales, Scotland and Northern Ireland run their own schemes with different rules.
The test is each parent's own adjusted net income, not the household total, so if either parent is over £100,000 the family loses both, even if the other earns little. This is why a pension contribution that keeps income at £100,000 can be worth far more than the tax saving alone.
£109,000 at the trap in Scotland
Scotland sets its own income tax, and the trap is sharper: at £109,000 the Scottish take-home is about £68,002, and the marginal rate in this band is around 70% rather than 62%, because the allowance withdrawal sits on top of a higher Scottish rate. The Scottish income tax calculator shows the bands.
Salaries near £109,000
| Salary | Take-home a year | Allowance left |
|---|---|---|
| £108,000 | £71,597 | £8,570 |
| £109,000 | £71,977 | £8,070 |
| £110,000 | £72,357 | £7,570 |
Work out your own figure
The tables assume a salary equal to adjusted net income and the standard tax code. A bonus, benefits in kind or other income change the point at which the trap bites. Open the take-home pay calculator to add them, or see the salary after tax pages for the full breakdown.