The £100,000 tax trap
Earn between £100,000 and £125,140 and every extra pound is taxed at 62%. That is harder than the rate a millionaire pays on their next pound. Here is why, and how a pension gets you out of it.
Why it happens
Everyone gets a £12,570 Personal Allowance, the slice of income taxed at 0%. But once your adjusted income passes £100,000, you lose £1 of that allowance for every £2 you earn. The pound you lose was tax-free; now it is taxed at the 40% higher rate. So on top of the 40% you already pay on the new pound, you pay another 40% on a pound of allowance you just lost. That is 60% in income tax, or 62% once the 2% upper-rate National Insurance is counted.
Up to £100,000
42%
Higher rate plus NI. Normal.
£100,000 to £125,140
62%
Allowance withdrawn. The trap.
Above £125,140
47%
Additional rate plus NI. Lower than the trap.
Try it with your salary
Drag your salary to see the marginal rate and what you keep from a pay rise. Then add a salary-sacrifice pension and watch the Personal Allowance come back.
2026/27 rates, England, Wales and Northern Ireland, no student loan. Open £110,000 in the full calculator to add student loans, Scotland or a different pension type.
How a pension escapes it
Pension contributions reduce the income the taper is measured against. Bring your adjusted income back to £100,000 and the full £12,570 allowance is restored. On a £110,000 salary, sacrificing £10,000 moves £10,000 into your pension while your take-home falls by only about £3,800, because the income you redirected was being taxed at up to 62%. It is the most tax-efficient band in the system to pay into a pension.
Common questions
What is the £100,000 tax trap?
Once your adjusted income passes £100,000, £1 of your £12,570 tax-free Personal Allowance is taken away for every £2 you earn. That lost allowance is taxed at 40%, so each extra £1 of pay is effectively taxed at 60%, or 62% once 2% National Insurance is added. The allowance runs out completely at £125,140.
How much of a pay rise do I actually keep in the trap?
At a £110,000 salary a £1,000 pay rise leaves you with about £380 after tax, National Insurance and the lost allowance. You give up roughly £620 of the £1,000.
How do I avoid the 60% tax trap?
Pension contributions reduce your adjusted income. A salary-sacrifice or relief-at-source pension contribution that brings your income back to £100,000 restores your full Personal Allowance. Because money in this band is taxed at up to 62%, the take-home you sacrifice to fund the pension is small relative to the amount going into your pot.
Does the trap apply in Scotland?
The Personal Allowance is UK-wide, so the withdrawal between £100,000 and £125,140 applies to Scottish taxpayers too. The exact marginal rate differs because Scotland sets its own income tax bands. Use the full calculator with the Scotland option to see your figure.
See your own numbers in full
The calculator adds student loans, Scotland, pension types and more.
Open the calculatorFigures use 2026/27 HMRC rates for England, Wales and Northern Ireland, with no student loan. Personalised tax advice is out of scope. See the myTakeHome tax guide for the wider picture.