Crossing the £100,000 income threshold in the UK can trigger a series of financial consequences that go far beyond paying more tax. While it might seem like a milestone worth celebrating, it can result in the loss of several valuable benefits, especially for working parents.
Employers have a key role to play in helping their people understand and manage the impact of this threshold. With the right support, it’s possible to avoid unnecessary losses and improve overall financial wellbeing.
This article explores how employers can help their people navigate this threshold and protect their financial wellbeing.
What employers need to know
Understanding the mechanics of the £100,000 threshold is essential for supporting employees effectively. Employers should be aware that:
- The threshold is based on adjusted net income, which includes salary, bonuses, and other taxable benefits, minus allowable deductions.
- Crossing the threshold can result in a steep loss of benefits, including personal allowance, tax-free childcare, and funded childcare support (in England).
- Employees may not realise the full impact until they’ve already lost access to these benefits — proactive communication is key.
- With income tax thresholds frozen until April 2031, more high earners than ever before are likely to be pushed into the higher rate tax bracket.
What changes at £100,000?
Once an employee’s adjusted net income exceeds £100,000, they begin to lose access to a range of government support and tax reliefs.
- Personal allowance: For every £2 earned over £100,000, £1 of the tax-free personal allowance is lost. This creates an effective marginal tax rate of 60% between £100,000 and £125,140.
- Funded childcare (England only): From September 2025, the government will offer up to 30 hours of funded childcare per week for children aged 9 months to 3 years — but only to parents earning under £100,000.
- Tax-free childcare: This scheme, worth up to £2,000 per child annually, also disappears once adjusted net income exceeds £100,000.
The financial impact of losing these can be significant, and in some cases, cost families £7,500 to £10,000 or more.
The real-world impact on employees
Employees are increasingly aware of the consequences of crossing the threshold. Some are asking to cap their salaries, turning down promotions, or opting for non-cash benefits. Others are reducing their working hours to remain eligible for childcare support.
These are rational decisions in response to a system that penalises modest pay increases with disproportionate losses.
How you can help
Employers can play a vital role in helping employees manage their income and avoid unintended financial consequences.
Here are five practical strategies.
1. Offer salary exchange options
Salary exchange (also known as salary sacrifice) allows employees to redirect part of their salary into benefits such as pensions, reducing their taxable income and boosting long-term savings.
Other salary exchange options include:
- Electric vehicle (EV) leasing schemes
- Cycle-to-work programmes
- Additional annual leave
These benefits are tax-efficient and can help employees stay below the £100,000 threshold.
The Autumn Budget 2025
Following the Autumn Budget 2025, from April 2029, pension contributions made via salary exchange will be capped at £2,000 per year for National Insurance contribution (NIC) exemption. Contributions above this limit will be subject to employer and employee NICs at standard rates. Other salary exchange options, such as EV leasing and cycle-to-work, are not affected by this cap.
This cap effects NIC exemptions for pension contributions made via salary exchange only and does not affect normal contractual employer pension contributions.
Employees and employers should plan ahead for these changes, especially those seeking to use salary exchange to remain below the £100,000 threshold.
2. Rethink bonus structures
Consider offering bonuses as pension contributions or share options, or allowing them to be deferred. This can prevent income from exceeding the threshold in a single tax year.
3. Support flexible working
Employees on hourly or flexible contracts may benefit from temporarily reducing their hours while their children are eligible for childcare support. Even small adjustments can make a big difference.
4. Encourage use of allowable deductions
Expenses such as professional memberships and charitable donations (via Gift Aid) can reduce adjusted net income. Employers should ensure employees are aware of what they can claim.
5. Help employees plan ahead
Timing matters. Employers can support employees by:
- Delaying income (e.g. bonuses or freelance work) to the next tax year
- Bringing forward pension contributions or charitable donations
- Providing access to financial planning support
Broadstone’s personal financial planning experts can help your employees make informed decisions and maximise their available allowances.
Every employee deserves to feel confident about their financial future — but with rising costs, shifting tax rules and complex benefit systems, it’s easy to feel overwhelmed. Whether someone is just starting out, building savings, or preparing for retirement, having access to expert guidance can make all the difference.
Offering financial planning services — whether funded by the company or available as an employee-paid benefit — can have a powerful impact. It supports financial wellbeing, boosts morale and retention, and shows your people that you’re invested in their long-term success.
Final thoughts
The £100,000 threshold is more than just a tax milestone — it’s a tipping point that can affect family finances, career decisions and employee engagement. By offering proactive support and clear guidance, employers can help their people avoid the trap and make confident financial choices.
This article is for information purposes only and does not constitute financial advice. Tax and pension rules are subject to change.
