How UK pensions work: workplace, personal and State pensions
A practical guide to workplace and personal pensions, tax relief, annual allowances, investment choices, the State Pension and turning pension savings into retirement income.
Tax · Calculator 24
UK Tax Cliffs & Extra Work Calculator 2026/27
Compare a pay rise, overtime or extra working days after Income Tax, employee National Insurance, pension choices, Child Benefit, childcare support and work-related costs.
1 Enter your figures2 Review assumptions3 Explore the result
Tax year: 2026/27.One household comparison covering Income Tax, employee National Insurance and selected family-support cliffs.
Your figures
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Extra accessible household cash
+£4,800Per year after modelled tax, employee NI, pension, family support and £1,000 of extra costs. About £240 per entered day or shift.Extra gross pay kept as cash48.0%After entered costs and support changes
Extra pension funded£0Not accessible cash
Family support lost£0£1,600 before; £1,600 after
No modelled cliff is crossed.
The result can still face a high marginal deduction rate within a band. Compare the cash retained with the time, pension value and extra costs involved.
Before and after the change
| Annual measure | Current position | Extra-work scenario | Change |
|---|---|---|---|
| Gross employment income | £95,000 | £105,000 | +£10,000 |
| Adjusted net income | £90,000 | £100,000 | +£10,000 |
| Income Tax + employee NI | £27,243 | £31,443 | +£4,200 |
| Gross pension | £5,000 | £5,000 | £0 |
| Net Child Benefit | £0 | £0 | £0 |
| Tax-Free Childcare + entered free-hours value | £1,600 | £1,600 | £0 |
Pension threshold markers
£40,000 would bring it to the £60,000 Child Benefit charge threshold. These are markers, not recommended contribution amounts; annual allowance, relevant earnings and access needs still matter.
Assumptions used
- 2026/27 Income Tax bands and employee National Insurance rates are held constant for one annual comparison.
- Gross pension contributions reduce adjusted net income. Salary sacrifice also reduces employee NI; relief at source and net pay do not in this model.
- The calculation assumes all relief-at-source higher-rate relief is successfully received. Timing through a tax code or refund is ignored.
- The High Income Child Benefit Charge starts above £60,000 and reaches 100% at £80,000 of the higher earner’s adjusted net income.
- Tax-Free Childcare and the entered free-childcare value are removed if either partner is above £100,000. Minimum earnings, child age, disability caps and reconfirmation rules are not tested.
- Student loans, benefits, savings and dividend tax, employer NI, Gift Aid and interactions with other allowances are excluded.
Use this as a decision map, not a reason to avoid earning more. A low cash-retention result can still include valuable pension funding, career progression or future pay benefits that one tax-year model cannot measure.
Common questions
Tax cliffs and extra-work FAQs
What is a tax cliff?
A tax cliff is a threshold where a small income change can remove a relief or support entitlement abruptly. The £100,000 adjusted-net-income ceiling for Tax-Free Childcare and working-parent free childcare can behave this way. Other rules, such as the Personal Allowance taper and High Income Child Benefit Charge, withdraw value progressively.
What is adjusted net income?
Adjusted net income starts with total taxable income and applies specified deductions and gross-ups, including qualifying gross pension contributions and Gift Aid. This lab models employment income, other non-savings income and gross pension contributions only, so use HMRC's full method where other items apply.
How does the High Income Child Benefit Charge work in 2026/27?
The charge starts when the higher earner's adjusted net income exceeds £60,000. It claws back 1% of Child Benefit for every £200 above that point, reaching 100% at £80,000. The lab applies the 2026/27 weekly Child Benefit rates to the number of children entered.
Why can earning above £100,000 have a high marginal cost?
Above £100,000, the Personal Allowance is withdrawn by £1 for each £2 of adjusted net income. A household may also lose Tax-Free Childcare and working-parent free childcare if either partner is above £100,000, producing an abrupt support loss in addition to Income Tax and National Insurance.
Can a pension contribution avoid a tax cliff?
A qualifying gross personal pension contribution can reduce adjusted net income, and salary sacrifice can reduce contractual taxable pay. That can affect the Personal Allowance, Child Benefit charge and childcare income ceiling. Pension annual allowance, relevant earnings, access and scheme rules must be checked separately.
Does salary sacrifice always save National Insurance?
In the lab, salary sacrifice reduces the employment income used for employee National Insurance, while net-pay and relief-at-source contributions do not. An actual arrangement must be offered and documented by the employer, cannot normally reduce cash pay below the National Minimum Wage, and can affect salary-linked benefits.
Does the result include Universal Credit or student loans?
No. Means-tested benefits, student-loan deductions, savings and dividend tax, employer National Insurance, Gift Aid and many less common allowances are excluded. These can materially change the cash retained from extra work.
Should I turn down extra work if the retained-cash percentage is low?
Not on this calculation alone. It measures one annual household cash change. Extra work may also build pension wealth, experience, promotion prospects or future earnings, while additional travel, childcare and time costs may be higher than entered. Treat the result as a decision map rather than advice.