UK Tax Traps Calculator

This is based on UK tax rates for England, Wales and Northern Ireland. Click here if you want to use Scottish tax rates.

Explore UK tax progressivity and marginal effects. This calculator reveals how tax traps can make the difference between 4-day and 5-day working weeks surprisingly small. Learn more about using this tool ↓

Your Details

Which Student Loan Plan?

Choose the plan that matches your course start date and region. See GOV.UK guidance.

  • Plan 1: Undergraduate, started before 2012 (England/Wales), or any date (Northern Ireland/Scotland)
  • Plan 2: Undergraduate, started 2012–2023 (England/Wales)
  • Plan 4: Undergraduate, started in Scotland
  • Plan 5: Undergraduate, started 2023 or later (England/Wales)
  • Postgraduate: Any UK postgraduate loan

High Income Child Benefit Charge

If you receive Child Benefit and your adjusted net income is over £60,000, you may need to pay the High Income Child Benefit Charge (HICBC). See GOV.UK guidance.

  • Child Benefit rates (2025-26):
    • First child: £26.05 per week (£1,354.60 per year)
    • Additional children: £17.25 per week each (£897.00 per year each)
  • Charge calculation: You pay a charge equal to 1% of your Child Benefit for every £100 of adjusted net income above £60,000.
  • Full charge: The charge reaches 100% of Child Benefit when adjusted net income is £80,000 or more.

Note: This calculator assumes you receive the full Child Benefit amount. If you don't claim Child Benefit, this charge won't apply to you.

Pension Contributions & Tax Relief

Pension contributions can significantly reduce your tax bill and avoid losing benefits such as Child Benefit, Tax-Free Childcare or Free Childcare for Working Parents. This calculator shows two main workplace pension arrangements. See GOV.UK guidance.

Pension Contribution Methods:

  • Net Pay Arrangement (Default - most workplace pensions):
    • Contributions deducted after National Insurance but before income tax
    • Automatic income tax relief at your marginal rate (20%, 40%, or 45%)
    • You still pay National Insurance on the contribution
    • Standard method for most workplace pension schemes
  • Salary Sacrifice (Tick checkbox if available):
    • Formal salary reduction before any deductions
    • Same income tax relief as net pay arrangement
    • Additionally saves on National Insurance (8% or 2%)
    • Most tax-efficient method available
    • Cannot reduce salary below minimum wage

Annual Allowance (2025-26):

  • Standard limit: £60,000 or 100% of earnings (whichever is lower)
  • Minimum allowance: £3,600 even with no earnings
  • High earners: Reduced allowance above £260,000 income

Comparison Example:

For a £100 pension contribution on a basic rate taxpayer:

  • Net Pay: Costs £80 (saves £20 income tax, no NI savings)
  • Salary Sacrifice: Costs £72 (saves £20 income tax + £8 National Insurance)

£100k Childcare Benefits Cliff

What You Lose at £100k

Both Tax-Free Childcare and England’s Free Childcare for Working Parents schemes are withdrawn once either parent’s adjusted net income exceeds £100,000. The £100 k limit applies separately to each parent, and eligibility is re-checked every 3 months. (In Scotland, Wales and Northern Ireland, funded-hours rules differ.)

Tax-Free Childcare
  • Eligibility: Children aged 11 and under (16 if disabled)
  • Benefit: Up to £2,000 per child (£4,000 if disabled)
  • How it works: Government tops up your childcare account by 20%
  • Cliff edge: Withdrawn when either parent exceeds £100k
Free Childcare for Working Parents
  • Eligibility: Children aged 9 months to 4 years
  • Benefit: 30 hours per week for 38 weeks (1,140 hours annually)
  • Value: Depends on local nursery rates
  • Availability: Only England - alternative schemes elsewhere but with broadly the same eligibility criteria
  • Cliff edge: Withdrawn when either parent exceeds £100k

How to Avoid the Cliff Edge

🏦 Pension Contributions

Increase pension contributions to reduce your adjusted net income below £100k. This maintains childcare benefits while boosting retirement savings.

Example: £105k salary → Contribute £6k to pension → £99k adjusted income → Keep all benefits
📅 4-Day Work Week

Negotiate a 4-day work week to reduce gross salary below £100k. Often the financial impact is surprisingly small once benefit losses are considered.

Example: £105k salary (5 days) vs £84k salary (4 days) + retained benefits may have similar net impact
💼 Salary Sacrifice

Use additional salary sacrifice schemes (cycle to work, electric cars, additional pension) to reduce adjusted net income.

Why This Matters

The £100k childcare cliff can create very high effective marginal tax rates and in some circumstances may mean that a higher income actually leaves families worse off. This calculator helps you visualize these effects and plan accordingly.

💡 Tip: Use the daily breakdown chart to see how the last day of a 5-day work week might provide minimal additional take-home pay when childcare benefits are considered.

Daily Tax Breakdown Chart

This chart shows a full 5-day workweek, with each bar representing one day of earnings. Each bar is stacked to show how the gross pay for that day is divided between taxes and take-home pay.

  • Monday: Shows the effect if you only worked one day a week.
  • Tuesday - Friday: Illustrate how adding each extra workday increases gross pay but also increases taxes, demonstrating the diminishing returns on take-home pay.
The chart highlights that while total pay rises with more days worked, the take-home per day decreases due to progressive taxation and the tapering of the personal allowance.

  • Net Pay (bottom, green): Your take-home pay after all deductions
  • Pension Contribution (blue): Your daily pension contribution
  • Student Loan Repayment (purple): Daily student loan repayment (if applicable)
  • Child Benefit Charge (red): Daily High Income Child Benefit Charge (if applicable)
  • Income Tax (burgundy): Daily income tax deduction
  • National Insurance (top, orange): Daily National Insurance contribution

The total height of each bar represents your daily gross salary. Hover over each section to see the exact amounts.

Total Tax Breakdown Chart

This pie chart shows the proportion of your total gross salary that goes to different taxes and deductions.

  • Net Pay (green): The percentage you take home after all deductions
  • Income Tax (burgundy): Percentage paid as income tax to HMRC
  • National Insurance (orange): Percentage paid as National Insurance contributions
  • Pension Contribution (blue): Percentage contributed to your pension (if applicable)
  • Student Loan Repayment (purple): Percentage going to student loan repayment (if applicable)
  • Child Benefit Charge (red): Percentage going to High Income Child Benefit Charge (if applicable)

The values shown reflect your selected time period (annual/monthly/weekly). Hover over each slice to see exact amounts and percentages.

Summary

Daily Tax Breakdown

Total Tax Breakdown

Income Tax Breakdown

Band Threshold Taxable Slice Rate Tax Due

National Insurance Breakdown

Band Threshold Slice Rate NI Due

Student Loan Repayment Breakdown

Plan Threshold Taxable Slice Rate Repayment

Child Benefit Charge Breakdown

Child Benefit Threshold Chargeable Income Charge Rate Charge

Understanding UK Tax Progressivity and Tax Trap Effects

This calculator helps you visualise how the UK's progressive tax system affects your take-home pay, with a particular focus on understanding the marginal effects of working different numbers of days per week.

Key Insights This Tool Reveals:

  • Tax Traps: Discover how certain income levels create "tax traps" where earning more can result in dramatically higher effective tax rates
  • 4-Day vs 5-Day Week: See how surprisingly small the take-home pay difference can be between working 4 and 5 days, especially around key thresholds
  • Pension Benefits: Understand how pension contributions can help you avoid tax traps and significantly improve your effective take-home rate
  • Child Benefit Trap: Explore the £60,000-£80,000 income range where Child Benefit is gradually withdrawn at marginal rates of around 50-60%
  • Personal Allowance Trap: Examine the severe £100,000-£125,140 range where you lose personal allowance, creating marginal tax rates over 60%

How to Use This Calculator:

  1. Enter your details: Input your salary, pension contributions, student loan plan, and number of children
  2. Check the summary: View your annual breakdown of taxes, National Insurance, and take-home pay
  3. Explore the daily breakdown: See how your tax burden is distributed across a working week
  4. Experiment with scenarios: Try different salary levels around £60k, £80k, £100k, and £125k to see the tax traps
  5. Test pension contributions: See how increasing pension contributions can improve your effective rate

Important Tax Thresholds to Explore (2025-26):

£60,000 - £80,000 Child Benefit withdrawal begins - marginal rates of around 50-60% for parents
£100,000 CHILDCARE CLIFF Complete loss of Tax-Free Childcare and Free Childcare for Working Parents - families can end up significantly worse off.
£100,000 - £125,140 Personal allowance withdrawal - marginal rates can exceed 60%
Caught in a tax trap? Try pension contributions or 4-day weeks - the savings may surprise you

💡 Tip: Use the daily breakdown chart to see exactly which days of the week bear the highest tax burden - this often reveals counterintuitive patterns where the last day worked provides very little additional take-home pay.