The 60% tax trap between £100,000 and £125,140
By NetPayFinder team · Updated 5 October 2026 · Figures for the 2026/27 tax year, computed from official rates
Why income between £100,000 and £125,140 is taxed at an effective 60%, with a worked example and how pension contributions get you out.
Most people think the top rate of income tax in England, Wales and Northern Ireland is the additional rate. In practice, the highest marginal rate on earned income applies to a band lower down, between £100,000 and £125,140. In that range, each extra pound you earn is taxed at an effective 60%. This guide explains why, and what you can do about it.
How the Personal Allowance taper works
Most people get a tax-free Personal Allowance of £12,570. But once your adjusted net income goes over £100,000, the allowance is reduced by £1 for every £2 of income above that limit. By £125,140, it’s gone completely. GOV.UK’s Income Tax rates and Personal Allowances page sets out the rule.
Adjusted net income is broadly your total taxable income, including salary, bonus, taxable benefits, savings interest, dividends and rental profit, minus some deductions such as pension contributions paid with tax relief and Gift Aid donations. It’s the same measure used for the High Income Child Benefit Charge.
Why the effective rate is so high
In this band, each extra £1 of income does two things:
- It’s taxed at the higher rate of 40%.
- It removes some of your Personal Allowance, so a slice of income that used to be tax-free becomes taxable at the higher rate as well.
Put together, the effective rate on income in the band is 60%. Add employee National Insurance at 2%, and you keep only about £38.00 of every extra £100 you earn. Once your income is above £125,140, the allowance has gone, and the marginal rate falls back to the higher rate until the additional rate of 45% starts.
Worked example: £110,000 salary
Take someone earning £110,000 a year with no pension contributions. Their income is above the taper threshold, so their Personal Allowance is reduced to £7,570.
| Step | A year | A month |
|---|---|---|
| Gross pay | £110,000 | £9,166.67 |
| Taxable pay | £110,000 | £9,166.67 |
| Income tax | −£33,432 | −£2,786.00 |
| National Insurance | −£4,211 | −£350.88 |
| Take-home pay | £72,357 | £6,029.78 |
Personal Allowance £7,570. Income tax: basic rate 20% on £37,700 = £7,540.00; higher rate 40% on £64,730 = £25,892.00.
Compared with a salary of £100,000, they earn £10,000 more but pay £6,000 more income tax. Their take-home pay rises by just £3,800. You can see each salary in the band on our salary pages, from £100,000 through £110,000 and £125,000 to £130,000.
Who is affected
The taper used to affect only a small group of very high earners. Because the threshold of £100,000 has not been raised for many years while salaries have grown, more people now find themselves in the band, including many senior professionals, managers and experienced specialists. It can also catch people whose salary is below the threshold but who receive a bonus, overtime, a taxable benefit such as a company car, or income from savings, dividends or property that takes their total over the line.
Because the test uses income for the whole tax year, you can be caught by a one-off payment. A salary of £95,000 plus an £8,000 bonus has the same effect as a salary of £103,000.
Getting out of the trap with pension contributions
Because the taper uses adjusted net income, anything that reduces it can restore your allowance. Pension contributions are the most common way.
Salary sacrifice is usually the most efficient. You give up part of your salary and your employer pays it into your pension instead. Your taxable pay falls, so you save income tax at the effective trap rate, plus National Insurance.
Back to our £110,000 earner. If they sacrifice £10,000 into their pension, their adjusted net income falls to the taper threshold and they get their full Personal Allowance back. Their income tax falls by £6,000, and their take-home pay drops by only £3,800. Each £1 that reaches their pension costs them about £0.38 of take-home pay.
Net pay pension schemes work in a similar way for income tax, as contributions come out of pay before tax, but don’t save National Insurance.
Relief at source schemes, such as most personal pensions and SIPPs, add basic-rate relief to your pot. You claim the rest through Self Assessment, and your gross contribution is deducted from your adjusted net income, which restores your allowance. Our guide to pension tax relief explains the difference.
Try your own numbers in the salary sacrifice calculator. It shows when a contribution takes you out of the taper.
Gift Aid and other ways to reduce adjusted net income
Donations to charity under Gift Aid also reduce your adjusted net income by the grossed-up amount of the gift, so they can restore some of your allowance too. You claim this through Self Assessment.
Other options depend on your employer: some offer electric car or cycle-to-work schemes through salary sacrifice. These reduce your taxable pay in the same way. Each has its own trade-offs, so check what you’d be giving up.
Bonuses and pay rises in the trap
A bonus or pay rise that takes you into the band is worth much less than you might expect. The pay rise calculator shows how much of a rise you keep, and the bonus tax calculator shows the effect on your payslip. Many employers let you sacrifice some or all of a bonus into your pension before it’s paid, which can be worth considering if it would otherwise fall into the trap.
Planning ahead during the tax year
Adjusted net income is measured over the whole tax year, from 6 April to 5 April. That gives you time to act: if a pay rise or bonus is likely to push you into the band, you can increase pension contributions for the rest of the year rather than all at once. Keep a note of your expected income for the year, including bonuses and other income, and check it again before 5 April. If you contribute to a personal pension, make sure the payment reaches the provider before the end of the tax year for it to count.
Childcare support
Crossing the taper threshold can also affect childcare support. Tax-Free Childcare and the free childcare hours for working parents both have an upper income limit for each parent. If either parent’s adjusted net income is expected to be above it, the family isn’t eligible. Check the current limit on GOV.UK’s Tax-Free Childcare page. Reducing your adjusted net income through pension contributions can help here too.