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Tax 6 min read • February 2026

The £100k salary trap: how losing your personal allowance really works

If you earn between £100,000 and £125,140, you're in one of the most punishing tax bands in the UK system. The effective marginal rate here isn't 40% — it's 60%. Here's why, and what you can do about it.

⚠️
Not tax advice. This article explains how UK tax rules generally work. Tax is personal — your situation may differ. For your own position, consult HMRC guidance or a qualified tax adviser.

How the trap works

Everyone gets a Personal Allowance of £12,570 — income you don't pay tax on. But once your income exceeds £100,000, that allowance is reduced by £1 for every £2 you earn above the threshold.

At £125,140, your Personal Allowance reaches zero. That £25,140 of income has effectively been taxed twice:

  • 40% higher-rate tax on the income itself
  • 20% extra tax on the Personal Allowance you've lost (40% of £12,570 ÷ 2)

Result: 60% marginal rate on earnings between £100k and £125,140.

📊 The numbers
Earn £100,000 → take home ~£67,500. Earn £110,000 → take home ~£71,500. That extra £10,000 gross only gives you £4,000 net — a 60% effective rate.

The pension contribution solution

Pension contributions reduce your "adjusted net income" — the figure used to calculate Personal Allowance tapering. If you earn £110,000 and contribute £10,000 to your pension, your adjusted income drops to £100,000 and your full Personal Allowance is restored.

The £10,000 pension contribution effectively cost you only £4,000 in lost take-home pay. Run your own numbers in the Salary Sacrifice Optimiser to see how much you can claw back. (because you avoided 60% tax). The lets you model how much extra this contributes to your retirement pot over time.

Other ways to reduce adjusted income

  • Salary sacrifice: Reduce gross pay for pension, cycle-to-work, etc. — covers the mechanics and the National Insurance saving
  • Gift Aid donations: Grossed-up amount reduces adjusted income
  • Trading losses: If you have a side business with losses, these can help

Child benefit charge: another cliff edge

The High Income Child Benefit Charge kicks in at £60,000 and reaches 100% at £80,000 (2025/26 rates). This is another reason to salary sacrifice or increase pension contributions if you're in this zone.

🔧 Model your own position
Use our take-home pay calculator to see exactly how pension contributions affect your net pay in the £100k trap zone.

The real maths: what 60% looks like

Income
Effective marginal rate
Personal Allowance remaining
£100,000
40%
£12,570
£110,000
60%
£7,570
£120,000
60%
£2,570
£125,140
40%
£0

The five ways to escape the trap legally

🌅 Additional pension contributions
The most powerful escape: a £10,000 pension contribution from someone earning £110,000 reduces adjusted net income to £100,000, restoring the full Personal Allowance and saving approximately £5,000 in tax — a 50% instant return on that contribution.
⚙️ Salary sacrifice
More efficient than personal pension contributions as it also saves National Insurance (employer and employee). If your employer offers salary sacrifice, this is the preferred route to reduce adjusted net income.
🎁 Gift Aid donations
Charitable donations through Gift Aid reduce adjusted net income by the grossed-up donation amount. A £1,000 cash donation becomes £1,250 after Gift Aid — and for a 60% marginal rate taxpayer, the after-relief net cost can be remarkably low.
📅 Timing income
For irregular income (bonuses, freelance work, property sales), deferring receipt to a tax year when total income stays below £100,000 avoids the trap entirely. This requires planning before the income arises, not after.
💍 Splitting income with a spouse
If your spouse or civil partner earns below the higher-rate threshold, ensuring income-generating assets are owned or shared jointly can prevent the entire tax liability from falling on the higher earner. Specialist advice is recommended for this approach.

Bonuses and the trap

Bonuses are particularly dangerous near this threshold. A £15,000 bonus that moves income from £98,000 to £113,000 incurs 60% effective tax on the above-threshold portion — netting roughly £8,200 after tax, not the £9,000 at the standard 40% rate. Anyone expecting a bonus should model the pension contribution needed to offset it before the bonus payment date. Speak to HR or a financial adviser; this cannot be unwound retrospectively.

Child Benefit and the compounding effect

The High Income Child Benefit Charge (HICBC) begins withdrawing Child Benefit at £60,000 adjusted income and removes it entirely by £80,000. If your income is between £100,000 and £125,140 and you have children, the combined effect of the Personal Allowance taper and the HICBC (for those who haven't already lost it) creates a marginal rate even higher than 60% in some narrow income bands. The Child Benefit & HICBC Calculator models this combined impact.

💡 BritSavvy note
The Salary Sacrifice Optimiser shows exactly how much sacrifice is needed to bring adjusted net income below any threshold, and the tax saving that generates. The Take-Home Pay Calculator lets you model different pension contribution scenarios to see their net impact.

Frequently asked questions

Why is the effective tax rate 60% between £100k and £125,140?
Between £100,000 and £125,140, your Personal Allowance is withdrawn at £1 for every £2 you earn. You pay 40% income tax on the extra earnings plus lose 40p of tax relief on each £1 of lost allowance — creating a 60% effective marginal rate.
How can I avoid the £100k tax trap?
The most common method is making additional pension contributions, which reduces your adjusted net income. A £10,000 pension contribution from someone earning £110,000 brings their adjusted income to £100,000, recovering the full Personal Allowance and saving roughly £5,000 in tax.
Does the £100k trap affect bonuses?
Yes — if a bonus pushes your total income above £100,000, it can trigger the Personal Allowance taper. Consider timing pension contributions to offset a bonus if you are near this threshold.

Frequently asked questions

Why is the effective tax rate 60% between £100k and £125,140?
Between £100,000 and £125,140 your Personal Allowance is withdrawn at £1 for every £2 you earn. You pay 40% income tax on the extra earnings plus lose 40p of tax relief on each £1 of lost allowance — creating a 60% effective marginal rate.
How can I avoid the £100k tax trap?
The most effective method is making additional pension contributions. A £10,000 contribution from someone earning £110,000 reduces adjusted net income to £100,000, restoring the full Personal Allowance and saving roughly £5,000 in tax. Salary sacrifice achieves the same result even more efficiently.
Does the £100k trap affect bonuses?
Yes — if a bonus pushes total income above £100,000 it triggers the Personal Allowance taper. Consider timing pension contributions to offset a bonus before the payment date. This cannot be unwound retrospectively.

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