Скачать или смотреть £100k tax trap and childcare

This week I was interviewed by Claer Barrett for the Financial Times about the “£100,000 childcare trap” – an issue I’m passionate about highlighting and work on with clients to help work out net adjusted income and whether it is worth pensioning down or reducing down hours.

It’s a bizarre financial reality in the UK: earn £99,999 and claim childcare subsidies, but get a £1 pay rise and you could lose around £20,000. You won’t financially recover until your salary hits £145k!

This isn’t just unfair – it actively discourages career advancement and increased productivity. Why accept a promotion or take on more work when it leaves you worse off? And this comes on top of the already harsh 60% marginal tax rate between £100k-£125k.

The impact extends beyond individual finances. In the NHS, for example, junior consultants approaching this threshold often rationally choose to work four days instead of five – creating staffing inefficiencies when we need healthcare professionals most.

This isn’t about sympathy for high earners. It’s about creating logical tax policies that don’t punish ambition or reduce economic output. People earning £100k-£145k shouldn’t face harsher effective tax rates than those earning above £145k.

Yes pension contributions can be made, but some cannot afford this.

Thanks to Claer and the FT for helping bring attention to this important issue in this weekend’s edition.

#shorts