Most childcare decisions can be revisited. The ones that depend on your income for the tax year cannot, once 5 April has passed. If your income is near £60,000 or near £100,000, the few weeks before that date are worth more than any other part of the childcare year.
Why income thresholds and childcare are linked
Two thresholds do the damage, and both use the same measure — adjusted net income, not salary.
£100,000 is a cliff. Cross it by a pound and you lose Tax-Free Childcare and the 30 funded hours outright, with no taper. Each parent is tested separately.
£60,000 to £80,000 is the High Income Child Benefit Charge band, where Child Benefit is clawed back at 1% for every £200 of income above £60,000.
Because both use adjusted net income, a single pension contribution can move you out of trouble on both at once.
The marginal rates that make action worthwhile
This is the part that changes the arithmetic. In these bands you are not giving up a pound to save forty pence of tax — you are giving up a pound you were mostly going to lose anyway.
| Income band | Effective marginal deduction |
|---|---|
| £60,000–£80,000, one child | about 53% |
| £60,000–£80,000, two children | about 64% |
| £60,000–£80,000, three children | about 74% |
| £60,000–£80,000, four children | about 84% |
| £100,000–£125,140 | 62%, before any childcare loss |
Above £100,000 the childcare loss sits on top of that 62%, which is why the cliff edge is worth more attention than its size suggests.
What actually moves adjusted net income
Pension contributions. The mechanics differ by route, and so does the amount you need:
| Route | To reduce ANI by £8,000 |
|---|---|
| Relief at source (personal pension) | pay £6,400 net — it grosses up to £8,000 |
| Net pay arrangement (via payroll) | £8,000 gross |
| Salary sacrifice | £8,000 of salary given up |
Salary sacrifice also saves employee National Insurance, and your employer saves theirs — some pass part of that on. The catch is timing: sacrifice has to be agreed before the pay is earned. A bonus already in your account cannot be retrospectively sacrificed.
Gift Aid donations. Deducted grossed up, so £800 given is £1,000 off adjusted net income. Useful for closing a small gap.
What does not work: ISA contributions (not taxable income in the first place), and deducting salary-sacrifice or net-pay pension contributions a second time. Those never appeared in your taxable pay, so counting them again produces a number that is wrong in your favour.
Limits to check before you contribute
The annual allowance for 2026/27 is £60,000, covering your contributions and your employer's. Several things can reduce or complicate it:
- Carry forward lets you use unused allowance from the previous three tax years, which for 2026/27 means 2023/24, 2024/25 and 2025/26. You must use the current year's allowance first.
- Tax relief is capped at 100% of your earnings, or £3,600 gross if you earn less. Carry forward enlarges the allowance, not this cap.
- The tapered annual allowance can reduce the £60,000 toward a floor of £10,000, but only if both threshold income exceeds £200,000 and adjusted income exceeds £260,000.
- The money purchase annual allowance cuts you to £10,000 permanently if you have flexibly accessed a pension. Taking only tax-free cash does not trigger it.
These interact, and getting them wrong creates a tax charge rather than a saving. If any apply to you, take advice before contributing.
A sensible order for the weeks before 5 April
- Work out your actual adjusted net income for the year — including bonus, benefits in kind, dividends, interest and rental profit.
- Identify which threshold you are near, if either.
- Calculate the gap to £100,000 or £60,000.
- Check your annual allowance, including carry forward and anything that restricts it.
- Choose the route: bonus sacrifice if the bonus has not been paid, salary sacrifice for future months, or a relief-at-source contribution for anything already received.
- Leave time. Payroll cut-offs for March are often early, and contributions must be made, not merely instructed, before 5 April.
What to ask an adviser
If you take advice, these are the specific questions worth putting:
- What is my annual allowance this year, and does the taper apply to me?
- How much unused allowance can I carry forward, and from which years?
- Have I triggered the money purchase annual allowance?
- Is bonus sacrifice available through my employer, and do they share their National Insurance saving?
- Given my age and plans, is locking this money away until at least 55 the right trade-off?
Common questions
I have already been paid my bonus. Is it too late?
For salary sacrifice, yes. A personal pension contribution under relief at source still reduces adjusted net income for the year, provided it is made before 5 April.
Does this get me the childcare back immediately?
Eligibility is reassessed at your next reconfirmation, so bringing income below the threshold restores the schemes from the following period rather than retrospectively.
I am £500 over £100,000. Is it worth bothering?
Almost certainly. A £400 net contribution to a relief-at-source pension grosses up to £500 and takes you under — against Tax-Free Childcare worth up to £2,000 per child and funded hours worth considerably more.
Both of us earn £95,000. Are we affected?
No. The £100,000 test is per parent, with no household total.