Question 1

How much do I need to put into a SIPP or Salary Sacrifice to avoid the £100,000 UK tax trap and childcare cliff?

Accepted Answer

Under ITA 2007 s.58 and SI 2015/522, your Adjusted Net Income (ANI) must be £100,000.00 or below. For example, on a £110,000 salary with 5% existing employee pension (Base ANI = £104,500), sacrificing an extra £4,500 gross via Salary Sacrifice (costing only £1,710 in net take-home pay in England/Wales or £1,372.50 in Scotland) or depositing £3,600 net (£4,500 gross) into a Personal SIPP reduces ANI to £100,000, restoring £2,250 of Personal Allowance and unlocking £8,500 per preschool child in 30-hour funded childcare and Tax-Free Childcare.

Question 2

What is the exact marginal tax rate between £100,000 and £125,140 in England vs Scotland?

Accepted Answer

In England, Wales, and Northern Ireland (rUK), every £2 earned above £100,000 withdraws £1 of the £12,570 Personal Allowance (ITA 2007 s.35), creating a 60% Income Tax rate plus 2% Employee Class 1 National Insurance = 62.0% marginal deduction (71.0% with a Plan 1/2/4/5 Student Loan, or 77.0% with a Postgraduate Loan). In Scotland, the 45% Advanced Rate combines with 22.5% Personal Allowance withdrawal and 2% Employee NI for a 69.5% marginal deduction (78.5% with a Student Loan).

Question 3

How does the 15% Employer NI pass-back work on Salary Sacrifice pensions in 2025/26 and 2026/27?

Accepted Answer

Under the National Insurance Contributions (Secondary Class 1 Contributions) Act 2025, employers pay 15% Class 1 Secondary NI on earnings above £5,000. When an employee sacrifices gross salary into a pension under ITEPA 2003 s.308, the employer saves 15% on the sacrificed amount. If the employer passes back 50% to 100% of this saving, every £1,000 sacrificed adds £1,075 to £1,150 into the pension pot while costing a £100k–£125k rUK taxpayer only £380 in net take-home cash.

Escape the £100,000–£125,140 62% / 69.5% Marginal Tax Trap & £100k Childcare Cliff