The £100k Tax Trap, with Worked Examples
Above £100,000 in 2026/27 the Personal Allowance tapers away: £25,140 more gross adds about £9,600 take-home. Worked figures and fixes.
For 2026/27, every pound of adjusted net income between £100,000 and £125,140 triggers the Personal Allowance taper - effective marginal Income Tax of 60% (62% with the 2% National Insurance rate that applies above the Upper Earnings Limit). It is a higher marginal rate than the 47% paid on income above £125,140.
Take-home ladder, £90k to £140k
The salary calculator on this site computes the figures below from the 2026/27 Income Tax and National Insurance rates published by HMRC (sources at the foot of the page). England, no pension contribution, no student loan, no other income:
| Gross salary | Annual take-home | Monthly |
|---|---|---|
| £90,000 | £62,757 | £5,230 |
| £95,000 | £65,657 | £5,471 |
| £99,000 | £67,977 | £5,665 |
| £100,000 | £68,557 | £5,713 |
| £105,000 | £70,457 | £5,871 |
| £110,000 | £72,357 | £6,030 |
| £115,000 | £74,257 | £6,188 |
| £120,000 | £76,157 | £6,346 |
| £125,140 | £78,111 | £6,509 |
| £130,000 | £80,686 | £6,724 |
| £140,000 | £85,986 | £7,166 |
Look at the gap between £100,000 and £125,140: a £25,140 pay rise only buys £9,553 of extra take-home - an effective marginal rate of 62.0% across that band.
What causes the 62% wall
The 2026/27 Personal Allowance is £12,570. Under section 35 of the Income Tax Act 2007 it is reduced by £1 for every £2 of adjusted net income above £100,000, so by £125,140 it is gone. Section 10(5A) of the same Act sets the start of the additional rate at exactly that point. Inside the band the marginal pound is taxed at the 40% higher rate, and so is the allowance it removes:
- 40% Income Tax on the marginal pound.
- 20% more on the 50p of Personal Allowance you just lost (40% × 50p).
- 2% National Insurance on the marginal pound (earnings above £50,270).
- Total: 62p of every additional pound.
The childcare cliff
For parents the line matters for more than tax. You cannot get Tax-Free Childcare if you or your partner expect adjusted net income over £100,000 for the tax year. It tops up childcare payments by up to £2,000 per child a year (£4,000 if the child is disabled), for children up to the September after they turn 11 (GOV.UK). The same income test applies to England's Free Childcare for Working Parents, 30 hours a week for 38 weeks a year for children aged 9 months to 4 years (GOV.UK). Neither tapers: the support stops once either parent's income is over the line. Scotland, Wales and Northern Ireland run their own free-childcare schemes with different rules.
What that costs depends on how many children you have, their ages and what your provider charges, so the figure is yours to work out, but it comes on top of the 62% marginal rate.
The pension-sacrifice play
Salary sacrifice into a workplace pension lowers your salary before Income Tax and NI are worked out, so it lowers adjusted net income pound for pound. If your employer offers it, the usual approach between £100,000 and £125,140 is:
- Work out the excess: gross pay plus any other taxable income, minus £100,000.
- Agree a sacrifice of that amount with your employer before the pay is due (HMRC EIM42765). Pension contributions from you and your employer count against your annual allowance, £60,000 for most people in 2026/27 and lower if it is tapered or you have flexibly accessed a pension. A sacrifice must not take your cash pay below the National Minimum Wage.
- Adjusted net income is now £100,000: the full Personal Allowance is back, childcare support is back, and the marginal rate on pay above £50,270 returns to 42% (Income Tax plus NI).
- No Income Tax or NI is taken from the sacrificed amount on the way in. It is not tax-free for ever: pension withdrawals are taxed as income, apart from the tax-free lump sum (usually 25%, up to the lump sum allowance).
From 6 April 2029 the NI saving will be capped: pension contributions made through salary sacrifice above £2,000 a year will attract Class 1 NI, while the Income Tax treatment stays the same (HMRC policy paper).
Related
Frequently asked questions
What is the £100k tax trap?
It is the Personal Allowance taper: above £100,000 of adjusted net income the allowance falls by £1 for every £2, and is gone at £125,140. In that band each extra pound costs 60% Income Tax, or 62% with 2% employee National Insurance, outside Scotland. Parents can also lose Tax-Free Childcare and, in England, the working-parent free childcare hours once either parent's expected adjusted net income is over £100,000.
Is the £100,000 trigger gross or net?
It is adjusted net income: taxable income less, for example, the grossed-up amount of Gift Aid donations and of pension contributions that get relief at source. Salary sacrifice works earlier, by lowering the salary itself. So a £105,000 salary with £6,000 sacrificed into a pension leaves £99,000, below the line, if there is no other income.
Should I refuse a pay rise above £100k?
Almost never. The marginal rate in the taper is 62%, not 100%, so you keep about 38p of each extra pound. If you would rather keep more of it, the usual route is to put the extra into a pension, which lowers adjusted net income and restores the allowance.
Does the trap reset at £125,140?
The taper ends at £125,140, where the Personal Allowance reaches nil. Above it you pay the 45% additional rate plus 2% NI, 47% in total, which is lower than the 62% inside the taper. So a pound earned at £150,000 costs less tax than a pound earned at £120,000.
How does the £100k trap interact with bonuses?
A bonus is employment income and counts toward the £100,000 line. A £20,000 bonus on a £90,000 salary puts £10,000 of it into the taper band, taxed at 62%. Sacrificing that part into a pension avoids it, but only if the sacrifice is agreed before the bonus counts as received (HMRC EIM42765).
Is the trap the same in Scotland?
The Personal Allowance and its taper are UK-wide, so the £100,000 trigger is the same. In Scotland the whole taper band falls in the 45% advanced rate, so the marginal rate there is 67.5% Income Tax, or 69.5% with 2% NI. Above £125,140 the 48% top rate applies.