Tier 4 · Optimise & SpecialiseM16

Threshold Management & Couples

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Your real marginal rate isn't what you think

Hidden cliff-edges: the £100,000–£125,140 band carries an effective ~60% rate as the Personal Allowance is withdrawn; the HICBC bites between £60,000 and £80,000 if you get Child Benefit; crossing £100,000 removes Tax-Free Childcare and free childcare hours entirely; a student loan adds 9% on top.

Key figure

Just over £0 with young children, losing childcare support, the effective rate on a slice of income can exceed 100% — a genuine "earn more, keep less" trap.

Pensions are the lever

A pension contribution reduces your adjusted net income, which can restore the Personal Allowance, remove the HICBC, and keep free childcare.

Tip:For someone at £110,000 with young children, redirecting the excess over £100k into a pension can be close to free once you count tax relief, the restored allowance and retained childcare.

gov.uk — Adjusted net income

Two people, double everything

Between spouses and civil partners there's no CGT or IHT on transfers, so a couple can use two ISA allowances (£40,000), two CGT exemptions (£6,000), two dividend and savings allowances, two basic-rate bands (hold savings/investments in the lower earner's name), and two sets of nil-rate bands.

Watch out:The transfer must be a genuine, outright gift — not just a paper arrangement.

Inheriting, and low-income wins

A surviving spouse gets an inherited-ISA allowance (the Additional Permitted Subscription, equal to the deceased's ISA) on top of their own. And the starting rate for savings (up to £5,000 at 0% for those with low other income), stacked with the £1,000 Personal Savings Allowance, lets a low earner or early retiree receive substantial interest tax-free.

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