Why £60,000 and £100,000 matter so much for parents
Most of the UK tax system rises gently with income. For families with children, two lines break that pattern. Above £60,000, the higher earner starts paying back Child Benefit, and by £80,000 it's all gone. Above £100,000, the family loses Tax-Free Childcare and the extra funded childcare hours, all at once, and the Personal Allowance starts to shrink.
The result is that a pay rise can leave a family worse off. A parent with two young children in nursery can lose many thousands of pounds of support for earning a single pound over £100,000.
How a pension top-up gets you back under the line
These rules look at your adjusted net income, not your headline salary. Salary sacrifice lowers it directly: you give up some salary, and your employer pays it into your pension. You save income tax and National Insurance on that money, and if it brings you under a threshold, you keep benefits you'd otherwise lose. That's why the calculator can show you adding thousands to your pension while your take-home barely moves, or even goes up.
If your employer doesn't offer salary sacrifice, personal pension contributions also reduce adjusted net income. You'd claim the extra tax relief through Self Assessment, and you wouldn't get the National Insurance saving. Gift Aid donations reduce it too.
Things to check before you change anything
Money in a pension is usually locked away until at least age 57 from 2028, so make sure you still have enough to live on and an emergency fund in cash. Salary sacrifice can affect mortgage applications, life cover linked to salary, and some statutory payments like maternity pay. Your pay after sacrifice can't fall below the minimum wage, and total pension contributions above £60,000 a year can trigger a tax charge.
From April 2029, the National Insurance saving on salary sacrifice is due to be capped at the first £2,000 a year. The income tax and threshold benefits aren't affected by that change.
Common questions
What is the High Income Child Benefit Charge?
If the higher earner in your household has adjusted net income over £60,000, they pay back 1% of your Child Benefit for every £200 above that. At £80,000 or more, the charge equals all of the Child Benefit you received.
What is the £100,000 childcare cliff?
If either parent has adjusted net income over £100,000, the family loses Tax-Free Childcare and the extra funded childcare hours for working parents in England. Earning £1 over the line can cost thousands of pounds a year in childcare support.
Why is there a 60% tax rate between £100,000 and £125,140?
Your £12,570 Personal Allowance shrinks by £1 for every £2 you earn above £100,000. Combined with 40% income tax, that makes an effective rate of 60% on income in that band, plus 2% National Insurance.
How does salary sacrifice help?
With salary sacrifice you give up some salary and your employer pays it into your pension instead. Your adjusted net income falls, which can bring you back under £60,000 or £100,000, and you also save income tax and National Insurance on the amount you sacrifice.
Does this calculator work in Scotland?
Child Benefit and its charge work the same across the UK, but Scotland has different income tax bands and different childcare schemes. This calculator uses the England, Wales and Northern Ireland tax bands and the England childcare rules, so Scottish results will be approximate.