Today in Money: our regular weekend long read focuses on the “100,000 trap” which could cost some workers in the UK tens of thousands. It’s leading people to turn down pay rises and work fewer hours. Our feature writer Brad Young investigates…
Saturday 13 September 2025 07:30, UK
A £1 pay rise in the UK could leave you tens of thousands of pounds worse off.
People are rejecting raises, working fewer hours and making huge pension contributions to avoid what has become known as the “£100,000 trap”.
Earners who breach this income threshold face a double financial whammy: losing lucrative childcare benefits and paying a higher income tax rate than the country’s top earners.
It means a parent with two children would need to earn £137,000 outside London or £149,000 in the capital before they had as much disposable income as when they earned £99,000, according to the Institute for Fiscal Studies.
“I feel like a complete a***hole complaining about it as, understandably, no one is sympathetic if you earn too much,” says father of two Robert Murton, 37, from London, who earns £130,000.
“[But] we’re not well-off people.”
The childcare trap
As of this month, people earning an adjusted net income below £100,000 are entitled to 30 hours of free childcare for children aged nine months to school age.
“Adjusted net income” means your salary plus the likes of interest and shares, minus pension contributions and some other transactions.
Those people are also entitled to up to £2,000 each year per child under 11 towards childcare costs through the Tax-Free Childcare scheme. For every 80p parents pay in, the government tops it up by 20p.
But once either parent breaches the £100,000 threshold, the only childcare benefits available to their family will be 15 hours free care for three and four-year-olds.
‘I don’t feel wealthy’
“I have more than a lot of people, but I also am not probably the person who was supposed to be eliminated from this help initially,” Murton says.
“I don’t feel like a wealthy person. Yes, I do get to go on holiday, but when I do, it’s the cheapest holiday.”
Only one in 10 people earning £100,000 or more would describe themselves as wealthy, despite being in the top 3.8% of earners, according to an HSBC survey.
“I still drive a 10-year-old car and live in a semi-detached house,” Murton says.
When the government extended the amount of free childcare available on 1 September, experts saw a spike in interest from people like Murton who wanted to avoid the £100,000 trap.
Financial expert Philly Ponniah said she saw a 300% increase in parents booking sessions to understand the threshold.
Kate Underwood, managing director at Kate Underwood HR and Training, also said more and more clients were asking about salary sacrifice and pensions to keep their free childcare.
It’s no surprise – these entitlements are worth thousands.
In the last financial year, Murton received £17,100 in government-funded childcare for his two children by performing “frustrating” financial gymnastics.
Murton, who works in project management, contributed £19,000 more than he wanted to his pension to reduce his adjusted net income to £99,000.
He says he appreciated he was “gaming the system” but argued the system hadn’t kept pace with rising wages and the cost of living.
Between 2015 and 2024, wages rose 43.2% and CPI inflation was close behind on 32.8%, according to the Institute of Chartered Accountants in England and Wales.
The £100,000 threshold hasn’t changed since 2017.
“We are not directors and CEOs of businesses, we’re just workers like everyone else, it’s just that our salaries have broadly probably gone up in line with inflation,” Murton says.
The tax trap
One of those chief executives is David Johnson, 52, from Staffordshire, who says the childcare trap has been a “massive, massive disincentive” for staff at his transport security company, EOS Risk.
He also pointed to an obscure quirk in the British tax system that means anyone earning between £100,000 and £125,140 – like a consultant doctor on an NHS starting salary – is taxed at a higher rate than a banker earning millions in the City.
If you haven’t heard of the £100,000 tax trap, scroll through for an explanation…
Together, these £100,000 traps were a factor in two of his employees deciding to move abroad, Johnson says.
“It saps ambition and hope, because the harder you work, the more effective you work, the less well-off you seem to become.”
Johnson says it was right that he wasn’t entitled to free childcare for his daughter due to his income, which he declined to share, revealing only that he pays “an absolute fortune in taxes”.
But he says income tax brackets need to be adjusted to take into account wealth disparity with the super-rich.
“There are high earners and then there are ultra-high earners, right? And I think the high earners are taking an unnecessarily large burden on their shoulders.”
Having fewer children
Dave Edgeley, 35, from Maidenhead and his wife have decided the burden is too big to grow their family.
“We’re at the age where we would actually quite like a third child, but realistically, that’s not going to happen,” he says.
Edgeley earns £160,000 but cuts his adjusted net income to £95,000 because, he says, he would only take home an extra £150 a month if he gave up free childcare and paid a 62% marginal tax rate.
He puts £60,000 in his pension and has taken a company car as a benefit in kind at the price of £700 a month to ensure his bonus doesn’t tip him over the threshold.
“We’re high earners, I can’t really question that, and we’re in a very fortunate position in that sense, and you would think that we would be best placed to have three children.
“But once you look at the financial side of it, you’re taking such a massive additional cost on.”
He says he and his wife, who earns £60,000, spend £48,000 on childcare fees already.
“I’m in peak earning age, I want to be maximising my take-home pay, paying off the mortgage, actually taking the kids on holiday to have experiences,” he says.
Like some other critics of the rules, Edgeley points out that a couple both earning £99,000 are entitled to free childcare while a single-income family on £101,000 isn’t.
The Money team asked the Treasury if childcare entitlements and the marginal tax system were working as the government intended them.
A government spokesperson said giving every child the best start in life was “central to our mission to break the unfair link between background and success”.
“The overwhelming majority of parents earn less than £100,000, and too often it’s the most disadvantaged families who miss out on the support they need.”
They added: “We are also committed to keeping taxes for working people as low as possible, which is why at last Autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee national insurance, or VAT.”
Illegal car seats full of safety defects were previously being sold on eBay, Shein and other online marketplaces, a Which? investigation has revealed.
Knock-off seats found by the consumer group included safety defects such as a thin seat base, no central point of release for the harness and a lack of side-impact protection.
Which? found several knock-off seats were priced at £40, tempting parents facing £80 for a standard, safe car seat. Some others were even priced as low as £12.50.
Little Dreams, ManoMano and Wish were also among the websites selling the products.
When car seat manufacturer Britax used one to show the effect of a 30mph impact, the test dummy was hurled through the windscreen.
Police have warned they found similar seats in vehicles at car seat checking events.
“I was not prepared for the frightening contraptions fitted in one vehicle I checked,” said PC Rachael Wonfor from Warwickshire Police.
“This leaves me wondering, how many other versions of this product are being sold and used daily with precious children’s lives relying on them?”
Buckinghamshire and Surrey Trading Standards previously dubbed these products “killer car seats”.
“Children’s lives will be at risk, with less affluent households most likely to be affected,” said Sue Davies, Which? head of consumer protection policy.
An eBay spokesperson said consumer safety was a top priority and they “swiftly removed these listings and notified buyers”.
“We work diligently to prevent prohibited listings through seller compliance audits, block filter algorithms for unsafe items, and AI supported monitoring by in-house specialists.”
A spokesperson for Shein said it “immediately removed” a product that had “been mislabelled by the third-party seller” and said they had taken action against the seller.
“Shein takes product safety very seriously and is committed to offering safe and reliable products to its customers.”
Little Dreams told Which? they would review the product in question, remove the listing from their website, and conduct a thorough internal investigation.
Wish and ManoMano did not respond to Which?
B&Q plans to cut 672 jobs in a major shakeup to “simplify” the business.
Deputy manager, trading manager and team leader roles are on the line in 318 shops and its head office.
The business is in consultation with workers impacted, including on redundancy packages and alternative positions.
Chief executive Graham Bell tells Sky News the “difficult choices” will “ensure that we continue to evolve and grow market share, by prioritising our resources where we can help our customers most”.
He added: “Ultimately, it is about setting our business up in the right way so that our colleagues are equipped to give our customers consistently exceptional customer service now and in the future, so that we give home improvers the choice and convenience they deserve.”
He says the aim is to “simplify our retail leadership structure”.
Petrol and diesel prices have fallen for the fourth consecutive week, according to the latest data.
Figures from RAC Fuel Watch show the average price of unleaded petrol stands at 133.72p per litre – down from 134.39p per litre four weeks ago.
Meanwhile, diesel is 141.58p per litre – down from 142.49p per litre four weeks ago.
Take a look at data from the last eight weeks in the graph below.
Hundreds of the country’s largest shops are at risk of closure from the government’s business rates reform, industry leaders claim.
The British Retail Consortium (BRC) said 400 large-format supermarkets and department stores could be compromised if they’re included in a new tax on premises with a rateable value over £500,000.
Up to 100,000 jobs could be lost and local councils’ business rates receipts from retail would fall by more than £100m a year, the trade association warned.
“Failure to act risks shuttering hundreds more stores, costing jobs, communities and the economy far more in the long run,” said BRC boss Helen Dickinson.
“Britain’s largest shops are magnets, pulling people into high streets, shopping centres and retail parks, supporting thousands of surrounding cafes, restaurants and smaller and independent shops.”
Retailers make small profit margins – around 2% to 4% for food – so a significant rise in rates would force shops to raise their prices, employ fewer people, or close their doors entirely, the BRC said.
The Treasury is looking at changes to business rates to improve growth, including removing “cliff edges” for small firms.
Firms saw business rates bills increase earlier this year after an original 75% discount on rates payments for hospitality, retail and leisure firms was reduced to 40% in April.
Pensions minister Torsten Bell has ruled out scrapping the triple lock guarantee – despite concerns it is becoming unaffordable.
The triple lock – which ensures the state pension rises every year by the highest of inflation, average wage growth or 2.5% – will remain in place during this parliament (which should end in 2029), he said.
The state pension is forecast to cost £149.3bn by then, according to the Office for Budget Responsibility (OBR).
That’s £15.5bn more than if it were increased in line with earnings alone.
“I always say that if you want to know what the government is doing, then you can read the manifesto, because it tells you, which is that the triple lock is staying for the course throughout this parliament,” Bell told an event.
Before becoming pensions minister, Bell had criticised the triple lock as a “messy tool” for achieving a higher state pension, arguing for a closer link to average earnings.
The OBR expects the government to spend 7.7% of GDP on state pensions by the early 2070s due to an ageing population, up from 5% in 2024-25.
A supermarket and a leading children’s charity are calling for teens to be given access to loyalty card savings.
Many grocers ban under-18s from discounts, lower member prices and personalised offers.
Co-op – the only national food retailer to provide independent membership access for 16 and 17-year-olds – has joined Bernardo’s in calling for change.
“It seems wrong that we’re close to giving 16-year-olds the right to vote, yet they are still denied access to basic savings on food in many stores,” Rachel Halter, director of membership at Co-op, told the Retail Gazette.
Barnardo’s chief executive Lynn Perry, said: “Too many young people are missing out on affordable and nutritious options that are critical for their development.
“With the new school year beginning, we urge all supermarkets to extend their discount schemes to under-18s.”
In exactly a month, some Britons will be required to scan their passport and have their fingerprints and photograph taken to enter European countries.
The European Union is rolling out its new entry-exit scheme, known as EES, but it will be a while until it is fully operational.
It’s being introduced to replace passport stamping for all non-EU citizens, helping countries to make sure visitors aren’t breaking the 90-day visa-free travel rule and strengthen their border control.
Here’s what you need to know…
12 October 2025
EU countries will start introducing EES for UK and non-EU nationals travelling for a short stay.
This will require some visitors to register at the border by scanning their passport and completing “biometric checks” – these are having fingerprints and a photograph taken.
Some people visiting the Schengen area, which includes 29 countries, will be required to complete the biometric checks, to start with.
This is because countries have six months to phase in the new system to minimise any disruption.
ABTA, the UK’s largest travel association, says at least one border point in each country should operate the new system by 12 October.
You can see the full list of the countries introducing the system below…
Once you’ve completed this registration process, you’ll only need to scan your passport and provide either fingerprints or a photograph to enter or exit any of the listed countries.
Children under 12 will not be fingerprinted, but they will be photographed under the new rules.
You don’t have to do anything before travelling, but you should be prepared for longer queues at the border.
The UK government says the checks should only take one to two minutes for each person, but they may lead to longer waiting times at border control.
11 December
By this point, 10% of border points in each country should be operating the new system.
All travellers entering the country at these points should be using the EES.
January 2026
At this stage, half of border crossing points in each country should have the system up and running.
But only a third of passengers will need to use it, the European Commission has said.
10 April 2026
The way we travel now will come to an end, and all border points in participating countries will need to have the system running.
Passports will not be stamped or checked manually from this date.
Using the Port of Dover or Eurotunnel from the UK to travel?
In most cases, the EES checks will happen when you arrive in the country you are visiting.
But, if you are heading abroad using the Port of Dover, the Eurotunnel at Folkestone or the Eurostar at St Pancras International in London, you will complete the checks before you leave the UK.
The government has provided funding to support the change in infrastructure, but has warned that travellers will need to leave more time for their journey.
A spokesperson said: “While we have done everything we can to ensure the required infrastructure is in place, anyone who is planning a trip to the European mainland once these checks are introduced will still need to allow more time for their journey as the new EU systems bed in.”
What happens to your data?
The European Commission says the data being collected when you use the EES is…
This data will be stored in the system and cannot be transferred to third parties – except in specific cases, which you can read about here.
Your data will be used by countries for several reasons including, identifying travellers who aren’t allowed to enter, find those using fake identities and help prevent and investigate serious crimes.
If you refuse to provide your biometric data, you will be denied entry.
By business and economics reporter James Sillars
The FTSE 100 has a chance of ending the week at a new record high.
The index, which is internationally focused, is trading just above August’s highest closing peak, currently at 9,323.
It’s up just shy of 0.3% and tracking further gains on the back of US inflation figures yesterday which did nothing to damage market expectations of a rate cut by the US central bank next week.
Miners are leading the way.
Laggers include energy firms as Brent crude oil costs sink below $66 a barrel.
They’ve fallen by around 3% since yesterday. An unexpected spike in some US inventories has added to growing market expectations of a glut of oil ahead.
It’s all good news for drivers of petrol and diesel cars, as this evolving trend in pricing could lead to some lower prices ahead.
As ever, much will depend on global shocks remaining scarce and stability in the value of the pound against the dollar.
As the dust settles on the announcement of the latest GDP figures, here’s the full report from our business and economics reporter James Sillars:
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