How the £100,000 tax trap works
Why crossing £100,000 can cost you more than the headline 40% rate suggests, and what you can do about it.
Written by Jack Dev · Last updated 2 October 2026
It isn't a new tax band — it's your allowance disappearing
Let's clear something up first: there's no secret '£100k tax band' hiding in the tax tables. The headline Income Tax rates are still 20%, 40% and 45% — nothing new kicks in at six figures. What actually happens is sneakier: your tax-free Personal Allowance starts getting clawed back. For every £2 you earn over £100,000, HMRC takes away £1 of your £12,570 allowance, until there's nothing left by £125,140.
Here's the part that catches people out: that withdrawn allowance doesn't just vanish quietly — it becomes taxable at 40%. Stack that on top of the tax you're already paying, and the real marginal rate between £100,000 and £125,140 works out at 60%. You keep 40p of every extra pound, not the 60p a normal higher-rate taxpayer keeps.
A worked example
Picture your salary creeping from £100,000 to £101,000. Normally that extra grand would just cost £400 in tax at 40%, leaving £600 in your pocket. But because you're also losing £500 of Personal Allowance to the taper — and that £500 gets taxed at 40% too — you lose an extra £200 on top. Total damage: £600 tax on £1,000 of extra income. On paper you're still a '40% taxpayer'. In practice, 60% of that raise just disappeared.
If you want to see this for your own number, drop any income between £100,000 and £125,140 into our Income Tax Calculator — the shrinking allowance shows up automatically in the result.
Why it's worse than it looks
And it doesn't stop at the tax bill. That same 60% zone usually overlaps with other things measured against 'adjusted net income' — Tax-Free Childcare and the 30 free childcare hours both disappear entirely the moment either parent crosses £100,000. For a family with young kids, losing those can cost more than the extra tax itself. We're talking several thousand pounds a year, not a rounding error.
There's a second trap lurking from £60,000 too: the High Income Child Benefit Charge, which claws back Child Benefit gradually until it's gone completely by £80,000. Cross both thresholds and you're effectively navigating two separate tapers at once.
What you can do about it
The good news: the £100,000 threshold isn't based on your salary — it's based on 'adjusted net income', and that figure comes down if you pay into a pension or give to charity through Gift Aid. Push enough into a pension through salary sacrifice (or a net pay arrangement) and you can pull your adjusted net income back under £100,000 — or under £60,000, if Child Benefit is what you're protecting — instead of just accepting the 60% hit.
This is genuinely one of the better pension tricks going: because the contribution also escapes the 60% band itself, money you put in here attracts up to 60% effective tax relief. Not many other corners of the tax system are this generous. Our Pension Tax Relief Calculator will tell you exactly how much relief a contribution at your income level attracts.
Frequently asked questions
Not officially — you won't find a 60% band on any tax table. But the combination of the 40% higher rate and losing £1 of Personal Allowance for every £2 you earn creates an effective marginal rate of 60% on income between £100,000 and £125,140.
No. NI has its own thresholds and doesn't care about the Personal Allowance taper — this 60% effect is purely an Income Tax thing.
Pension contributions and Gift Aid donations both reduce your 'adjusted net income', which is what the £100,000 threshold actually measures. Topping up a pension is by far the most common way people avoid or reduce the taper.
This guide is general information, not financial or tax advice — check GOV.UK or a qualified adviser for anything that affects a real financial decision.