The £100,000 tax trap
Earn between £100,000 and £125,140 and each extra pound is taxed at 60%, not 40%. This guide explains why, what it costs, and the two reliefs that reduce it.
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The figures are for 2026/27 and for England, Wales and Northern Ireland. Scotland sets its own income tax bands, so the percentages there are different.
Where the 60% comes from
Most people can earn £12,570 a year before they pay income tax. This is the personal allowance. Once your income goes over £100,000, the allowance shrinks by £1 for every £2 above it. At £125,140 it has gone completely.
Take an extra £100 of pay in that range. It is taxed at 40%, which is £40. It also removes £50 of your allowance, so another £50 that was tax-free is now taxed at 40%, which is £20. That is £60 of income tax on £100. National Insurance at 2% takes another £2, so you keep £38.
Above £125,140 there is no allowance left to lose, and the rate on extra pay drops back to 45%. So this band is taxed more heavily than the pay above it, which is why it is called a trap. Student loan repayments come on top. With a Plan 2 loan you keep £29 of each extra £100.
What it costs
A rise from £100,000 to £110,000
Income tax takes £6,000 of the £10,000 and National Insurance takes £200. You keep £3,800. The same rise from £80,000 to £90,000 would leave you with £5,800.
The whole band
By £125,140 the full £12,570 allowance has gone. Taxed at 40%, that costs £5,028 a year.
The figure HMRC uses: adjusted net income
The taper is not based on your salary. It is based on your adjusted net income, which is your total taxable income from every source, less certain tax reliefs. Two of those reliefs matter most here: pension contributions and Gift Aid donations. Bring your adjusted net income down to £100,000 and the whole allowance comes back.
How pension contributions reduce it
How the saving reaches you depends on how your pension is taken.
- Salary sacrifice, or a scheme where your employer takes the contribution before income tax: your pay is taxed on the lower figure, so the saving comes through your pay.
- Relief at source: your provider claims 20% from HMRC and adds it to your pot. HMRC counts what you paid plus that top-up, so each £1 you pay takes £1.25 off your adjusted net income. You claim the rest of the relief yourself, on a Self Assessment return or through HMRC's online service.
On a salary of £110,000, paying £10,000 into a pension by salary sacrifice brings your adjusted net income down to £100,000. Your take-home pay falls by £3,800, because the other £6,200 would have gone in tax and National Insurance.
A salary sacrifice cannot take your pay below the minimum wage. From April 2029, National Insurance will be charged on pension salary sacrifice above £2,000 a year. Pension tax relief also has its own limits, which gov.uk explains.
How Gift Aid reduces it
Gift Aid donations work in the same way. Give £800 and your adjusted net income falls by £1,000. In the taper band that restores £500 of allowance, which saves £200. As a higher rate taxpayer you can also claim back 20% of the £1,000, which is another £200. The donation has cost you £400. You claim on a Self Assessment return, or by asking HMRC to change your tax code.
The childcare limit at the same figure
£100,000 matters for another reason. You cannot get Tax-Free Childcare, or free childcare for working parents, if you or your partner expect an adjusted net income over £100,000 in the tax year. Tax-Free Childcare is worth up to £2,000 a year for each child. The taper takes the allowance away gradually. This limit does not: go over it and you are no longer eligible.
Common questions
Do I pay 60% on all my income?
No. Only on the part between £100,000 and £125,140. Pay below £100,000 is taxed as before.
Do I have to send a tax return if I earn over £100,000?
Not for that reason alone. It is not on gov.uk's list of reasons you must send one. You may need one for another reason, and it is one way to claim higher rate relief on pension contributions and Gift Aid.
Will my tax code change?
The number in a tax code is your tax-free amount for the year with the last digit removed. A smaller allowance means a smaller number. Our guide on how to read your payslip explains tax codes.
Try it with your own figures
The pay rise calculator shows how much of a rise you keep after tax, National Insurance, student loan and pension, and tells you when a rise takes you over £100,000.
Where these figures come from
All from gov.uk: income over £100,000, adjusted net income, tax relief on pension contributions, salary sacrifice, the change to salary sacrifice from April 2029, Gift Aid, Tax-Free Childcare, free childcare for working parents and who must send a tax return.