Money Worked Out

The 60% tax trap between £100,000 and £125,140

Tax year 2026/27 · Updated · Published by Money Worked Out

Most people who earn over £100,000 pay Income Tax at 40% on the top slice of their pay. But between £100,000 and £125,140, each extra pound costs 60% in Income Tax, because the tax-free Personal Allowance shrinks as pay goes up.

Why the rate is higher than the higher rate

Everyone starts with a Personal Allowance of £12,570, the part of income that is tax-free. Once your adjusted net income goes over £100,000, you lose £1 of that allowance for every £2 of income above the limit. By £125,140 it has gone.

So a £1 pay rise in this range does two things. The pound itself is taxed at 40%. It also turns 50p of your allowance into taxable income, which is taxed at 40% too. The two together make 60%. Add 2% employee National Insurance on pay above the upper earnings limit, and an employee keeps less than 40p of the pound.

Income Tax rate on each extra pound, outside Scotland, 2026/27: 0% up to £12,570, 20% to £50,270, 40% to £100,000, 60% to £125,140, then 45%.0%20%40%60%£0£100,000£150,00060%
Income Tax rate on each extra pound of income, outside Scotland, 2026/27. National Insurance is not included.

What a pay rise is worth in the trap

Take a salary outside Scotland that goes from £100,000 to £110,000. The extra £10,000 of pay brings £6,000 more Income Tax and £200 more National Insurance. Take-home pay goes up by £3,800 a year.

In Scotland the pay in this range falls in a higher Scottish band, so the rate on each extra pound is 67.5%. Our guide to pension salary sacrifice in Scotland explains the difference and opens the calculator with Scottish tax selected.

How pension contributions change it

The limit applies to adjusted net income, which is your taxable income less some reliefs. Pension contributions come off it, counted with any basic-rate tax relief your pension provider adds, and so do Gift Aid donations, counted with the tax the charity claims back. If they bring it back to £100,000 or below, you keep the whole Personal Allowance.

In the example above, paying the extra £10,000 into a pension through salary sacrifice would cost £3,800 of take-home pay, and the full £10,000 would go into the pension. The salary sacrifice calculator shows this for your own pay. Whether it suits you depends on when you need the money, and that is a decision for you or a regulated adviser.

If you pay into a pension from taxed pay and your provider adds basic-rate relief, use the higher-rate pension tax relief calculator to estimate any extra relief you can claim from HMRC. This method is called relief at source.

Other limits near the same income

Adjusted net income also sets the High Income Child Benefit Charge, which starts at a lower income. The Child Benefit calculator shows how much of the benefit the charge takes back. Some childcare support also stops when one parent's adjusted net income goes over £100,000.

To see your own figures, use the take-home pay calculator, or look at £100,000 after tax for a full breakdown at the start of the trap. The tax code checker explains why your tax code gets smaller as the allowance goes.

Questions

Is the 60% rate an official tax band?

No. The official rate on this income is still the higher rate of 40%. The 60% is the effect of the higher rate and the loss of the Personal Allowance together.

Does a bonus count?

Yes. A bonus is taxable income, so it counts towards adjusted net income in the tax year you are paid it.

Where does the trap end?

At £125,140, where the allowance reaches zero. Income above that is taxed at the additional rate of 45%, or at the top rate of 48% in Scotland.

Official guidance