The £100k Trap: Why GPs Are Cutting Sessions Just to Afford Childcare ?

When talking to GP clients there is a number that keeps coming up… 

£100,000. 

Not because it is a target, but because it has become a line that many GPs are actively trying not to cross. 

Now this has always been an important number to consider because of the loss of personal allowance, but with the loss of 30 hours free childcare and tax free childcare at this limit, it is driving behaviour in a way that should concern everyone in primary care. 

The shocking reality 

Take a GP Partner with: 

– Total income: £130,000 

– NHS pension contributions: £29,000 

– Adjusted net income: £101,000 

They are just £1,000 over the £100k threshold. 

And because of that, they are not eligible for: 

– 30 hours free childcare 

– Tax-free childcare 

So instead, they face the full cost of childcare provision. 

For two children attending nursery for around 30 hours per week, that could cost around £20,000 per year – out of pocket, from taxed income 

But that isn’t the worst part… 

To pay that £20,000 childcare bill, they need to earn more. 

But not £20,000 more. 

When you factor in: 

– The 60% effective tax band between £100k–£125k 

– 45% tax beyond that 

– National Insurance 

– NHS pension contributions (even allowing for tax relief) 

The reality looks more like this: 

To fund £20,000 of childcare, a GP would need to earn almost £60,000 of additional income. 

Whilst this is a theoretical example, this is reality! 

This isn’t just an interesting technical quirk in the tax system. 

It’s changing behaviour. 

We are seeing GPs reducing sessions to stay below £100,000. 

Not because the work isn’t there, but because working more can leave them with less cash available. 

And that creates a much bigger problem. 

We have a system that incentivises some GPs to work less, not more. 

This is at a time when GP Practices are feeling the pressure as much as ever, and GP partner sessions across the country are already declining. 

So what can GPs actually do about it? 

This requires proactive planning during the year. 

1. Pension contributions (including SIPPs)

One of the most effective tools available. 

Making additional pension contributions can: 

• Reduce adjusted net income 

• Bring income back below £100k 

• Restore 30 hours free childcare and tax-free childcare 

Done properly, this can significantly reduce the real cost of staying under the threshold.  

This won’t work for everyone, and you need to consider annual allowance tax charges. We would strongly recommend seeking financial and tax advice before considering this. 

2.  Limited company for other work

For GPs undertaking work outside of their partnership or employment, a limited company structure can provide greater flexibility. 

This can allow you to: 

• Control the timing of income 

• Manage when profits are extracted personally 

• Potentially avoid pushing your personal income over key thresholds 

This needs to be carefully considered, but done correctly, this can be an effective way of keeping adjusted net income below £100k, while still generating additional earnings. 

3. Salary sacrifice (for employed GPs)

If you’re a salaried GP, this is often underutilised. 

Salary sacrifice can: 

• Reduce taxable income 

• Improve overall efficiency 

• Help retain access to childcare benefits 

If using salary sacrifice for a company car, it’s important to consider the Benefit in Kind (BIK) charge. 

Traditional petrol/diesel vehicles can significantly reduce the benefit; however, electric vehicles are currently far more tax efficient, with much lower BIK rates, making them the most effective option in many cases. 

For more information, please contact our healthcare team here.

 

Footnote 

This example assumes adjusted net income of £101,000, meaning approximately £24,000 of additional income falls within the £100,000–£125,140 band, where the effective marginal tax rate is 60% due to the tapering of the personal allowance, plus 2% National Insurance. 

NHS pension contributions are assumed at 26.88%. After tax relief at 60%, the effective cost of these contributions in this band is 10.75%, resulting in total deductions of 72.75% and net retention of 27.25%. 

Income above £125,140 is assumed to be taxed at 45%, plus 2% National Insurance. NHS pension contributions attract tax relief at 45%, giving an effective cost of 14.78%, total deductions of 61.78%, and net retention of 38.22%. 

Applying these assumptions: 

• The first £24,000 of additional income generates approximately £6,540 of usable cash (£24,000 × 27.25%) 

• The remaining £13,460 required to reach £20,000 net requires approximately £35,200 of additional income (£13,460 ÷ 38.22%) 

This results in total additional income of approximately £59,200 to generate £20,000 of net cash.