Investment platform IG has issued an urgent demand for Chancellor Rachel Reeves to overhaul the £100,000 salary cliff edge, arguing that frozen tax and childcare thresholds are stifling retail investment and undermining ambition across the UK.
Research commissioned by the trading firm shared polling that revealed noticeable behavioural changes among workers approaching the threshold.
An estimated 82 per cent of those surveyed in the £90,000 to £125,000 earnings bracket reported actively taking steps to avoid breaching the £100,000 mark.
Nearly one in three have cut their working hours, whilst 28 per cent have declined promotions. Approximately a quarter have turned down bonuses or salary increases entirely.
Families face £100,000 tax 'cliff edge' unless Rachel Reeves reforms 'brutal' HMRC rule
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IG warns this widespread avoidance behaviour is constraining both earnings growth and long-term investment potential at a time when policymakers are seeking greater domestic participation in UK equities.
The platform's survey targeted what it describes as the HENRY demographic, "High Earner, Not Rich Yet," comprising mid-career professionals with strong savings capacity who are well positioned to channel capital into UK markets.
Almost half of respondents, 48 per cent, stated they lack the ability to invest sufficiently for future wealth creation due to tax and financial burdens.
Some 92 per cent of this group reported being unable to invest adequately, with 54 per cent indicating they would immediately increase their investments if childcare support were not withdrawn upon crossing the threshold.
The Chancellor is being called to introduce further reforms to the tax regime
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UK tax burden as a percentage of GDP | GB NewsIG's analysis calculated that a family with two nursery-age children accepting a standard inflation-linked pay rise could find themselves £13,139 worse off in the coming tax year.
Michael Healy, the 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."
He added: "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. Ultimately, it's about giving people the freedom to invest, save, and build wealth without being punished for progressing in their careers."
The investment platform has outlined four specific reforms it believes would unlock greater participation in UK capital markets. First, IG proposes linking the childcare income threshold to inflation.
Working parents have less than twenty four hours remaining to apply for free childcare that could save families thousands of pounds each year | GETTYNotably, the £100,000 limit for additional free childcare hours has remained unchanged since 2013 and would now sit at roughly £135,000 if adjusted for rising prices.
Furthermore, the firm advocates similar inflation-linking for the personal allowance withdrawal band, which currently creates effective marginal tax rates reaching 60 per cent for those earning between £100,000 and £125,000.
As well as this, IG recommends establishing a UK Equities Investment Scheme offering income tax relief on domestically-listed shares held within ISAs, potentially providing higher-rate taxpayers with annual relief of up to £8,000.
Finally, the platform urges ministers to abandon the planned £2,000 cap on National Insurance contribution-free pension salary sacrifice contributions scheduled for April 2029.
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