Most people picture the UK tax system as a tidy staircase: 20%, then 40%, then 45%. But there is a hidden step between £100,000 and £125,140 where the rate jumps to an effective 60% — and it catches people out every year, because nothing on your payslip is labelled "60%".
What the Personal Allowance is
Everyone starts with a Personal Allowance — the slice of income you can earn before paying any Income Tax. For 2026/27 it is £12,570, and it has been frozen at that level since 2021, with the freeze now set to last until April 2031. Earn below it and you pay no Income Tax at all.
How the taper works
Once your income passes £100,000, HM Revenue & Customs starts taking the allowance away. For every £2 you earn above £100,000, you lose £1 of your Personal Allowance. By the time you reach £125,140, the entire £12,570 has gone, and you have no tax-free allowance left.
Why that means a 60% rate
Here is the sting. In the £100,000–£125,140 band you are already a higher-rate taxpayer, so the extra income is taxed at 40%. But as you lose your allowance, more of your other income becomes taxable too — and that lost allowance is itself taxed at 40%. Put together, each extra £1 you earn in this band costs about 60p in tax.
A worked example for 2026/27:
| Salary | Personal Allowance | Income Tax |
|---|---|---|
| £100,000 | £12,570 | £27,432 |
| £110,000 | £7,570 | £33,432 |
| £125,140 | £0 | £42,516 |
Going from £100,000 to £110,000 — a £10,000 rise — adds £6,000 of Income Tax. That is the 60% rate in action. A pay rise, a bonus, or a bit of overtime that tips you over £100,000 can leave you barely better off.
How to escape the trap
The key is a measure called adjusted net income — the figure HMRC uses to work out the taper. Crucially, pension contributions reduce it. So if you bring your adjusted net income back down to £100,000, your full allowance is restored and the 60% band disappears.
On a £110,000 salary, paying the £10,000 difference into a pension does exactly that. Because the relief in this band is so high, the contribution costs you far less in take-home than you might expect — often around 60% relief, and more still through a salary-sacrifice arrangement, which also saves National Insurance. Our £100k tax trap calculator works out the exact contribution and the take-home impact for your salary.
Things to watch
- Bonuses and benefits count towards your income, so a bonus can push you into the trap for the year.
- The pension annual allowance limits how much you can pay in with tax relief — for most people it is generous, but very high earners can have a reduced (tapered) allowance, so it is worth checking.
- Other reliefs such as Gift Aid donations also reduce adjusted net income.
- The trap is the same whether you are paid through PAYE or self-employed — it is based on total income, not how you are paid.
In short
The £100,000 trap is one of the few places in the system where earning more can leave you worse off per pound. It is also one of the easiest to fix: a pension contribution that brings you back to £100,000 restores your allowance and removes the 60% rate. If you are anywhere near £100,000, it is worth doing the sums before the tax year ends.