Families face a ‘brutal’ £100,000 tax ‘cliff edge’ unless Chancellor Rachel Reeves changes an HMRC rule, according to investment and trading platform IG. IG is calling on the Government to take ‘urgent action’ to reform the £100,000 salary cliff edge, warning that frozen tax and childcare thresholds are suppressing retail investing and ‘damaging aspiration’. New consumer research from IG reveals the impact of the £100,000 tax and childcare cliff edge.

IG surveyed workers earning between £90,000 and £125,000 to understand how cliff-edge tax and childcare policies affect long-term wealth building. Nearly half (48%) said they cannot invest enough to build future wealth due to tax and financial pressures.

Among those with nursery-age children, this rises to 92%, with most saying they would immediately invest more if they did not lose childcare support at the £100,000 threshold.

The IG analysis found that a household with two nursery-age children could be £13,139 worse off next tax year by accepting a standard pay rise in line with expected wage growth.

According to the survey, 82% of households also reported actively taking steps to avoid exceeding the £100,000 threshold, with nearly a third reducing their working hours, 28% turning down promotions, and roughly a quarter refusing bonuses or pay rises.

Under HMRC rules, IG says that once a member of the household starts earning more than six figures, the personal allowance is gradually withdrawn, creating effective marginal tax rates of up to 60%, while eligibility for additional free childcare hours is also lost.

IG said that this group is key to increasing UK retail investment at a time when policymakers are looking to boost domestic participation in UK equities and support economic growth.

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Michael Healy, UK and Ireland Managing Director at IG Group, said: “When earning more leaves you with less capacity to invest, that’s not just a household issue – it’s a structural problem. The UK’s brutal tax cliff-edge system is weighing down the very households who are most able to fuel growth in UK capital markets.

“Reforming the cliff edge would remove the disincentive, unlock long-term investing among a key demographic, and support both household resilience and broader UK economic growth. It would allow families to plan for the future with confidence, increase engagement in UK markets, and ensure that ambition is rewarded rather than penalised.

“Ultimately, it’s about giving people the freedom to invest, save, and build wealth without being punished for progressing in their careers.”

IG is calling for four reforms. The first is to move childcare thresholds with inflation. The £100,000 limit for additional free childcare hours has been frozen since 2013 and would now sit at about £135,000 if adjusted in line with inflation.

Similarly, the firm is calling for the personal allowance cliff edge to be adjusted for inflation. IG said that higher earners lose their personal allowance between £100,000 and £125,000, creating effective marginal tax rates of up to 60%. If adjusted with inflation, these thresholds would stand at approximately £156,000 and £195,000 today.

IG believes a UK Equities Investment Scheme should be introduced. According to the platform, this would offer income tax relief on shares held in ISAs, encouraging middle earners to commit capital to domestic companies, with higher-rate taxpayers potentially receiving up to £8,000 in relief each year.

Finally, IG is urging for the government to abandon the planned £2,000 cap on National Insurance contribution-free pension salary sacrifice contributions set for April 2029. which would otherwise restrict families’ ability to manage adjusted income and protect them from cliff-edge losses, preserving flexibility and increasing their capacity to invest.