Crossing into six figures feels like a milestone, and it is — but it is also where the UK tax system plays its strangest trick. For a slice of income just above £100,000, the effective tax rate leaps to an eye-watering 60%, higher than anything the additional-rate payers face. It is not a published rate; it is a side effect of how the personal allowance is withdrawn. If you earn near this level, understanding it can be worth thousands. Here is how the 60% trap works in 2025/26.
The personal allowance taper
Most people keep a £12,570 tax-free personal allowance. But once your adjusted income passes £100,000, HMRC takes that allowance away — £1 of allowance for every £2 of income over the line. By the time you reach £125,140, the whole £12,570 has gone, and every pound of your income is taxed.
Here is why that creates a 60% rate. For each extra £100 you earn above £100,000, you not only pay 40% tax on the £100 itself (£40), you also lose £50 of personal allowance — which means £50 that was tax-free is now taxed at 40% (£20 more). Add the 2% National Insurance, and you lose about £62 of that £100. The band between £100,000 and £125,140 is, in effect, taxed at 60% before NI, or about 62% with it.
What you actually take home on £100,000
At exactly £100,000 you still have your full personal allowance, so the maths is more forgiving than just above it:
Income tax
20% on £37,700 plus 40% on £49,730 = £7,540 + £19,892 = £27,432.
National Insurance
8% to £50,270 plus 2% above = about £4,011.
Take-home
£100,000 − £27,432 − £4,011 = about £68,557 a year, or roughly £5,713 a month.
It is the income above £100,000 that gets punished. A pay rise from £100,000 to £110,000 hands you only about £3,800 of the £10,000 — the rest vanishes into the 60% zone. See your own figure on the take-home pay calculator.
The pension escape hatch
Because the taper is based on adjusted net income, a pension contribution is the cleanest way out. Contributions reduce your adjusted income, so paying enough to bring it back to £100,000 restores your personal allowance.
Picture someone on £110,000. They contribute £10,000 to their pension, dropping adjusted income to £100,000. They get 40% income tax relief on the contribution and recover the personal allowance they were losing — an effective relief of around 60%. In plain terms, a £10,000 pension contribution can cost them only about £4,000 of take-home, with £10,000 (or more, with employer salary-sacrifice NI savings) landing in their pension. There are few better-value moves in the tax system. The pension calculator shows the long-term effect.
Other thresholds bite here too The £100,000 line also removes eligibility for the 30 hours of funded childcare and Tax-Free Childcare. For parents, crossing it can cost thousands in lost childcare support on top of the 60% tax — making a pension contribution to stay under £100,000 even more compelling.
Why the trap exists
It is not deliberate policy so much as an interaction. The personal allowance withdrawal was introduced to claw back the tax-free amount from high earners, and because it overlaps with the 40% band, it produces the 60% spike. Successive governments have left it in place — partly because it raises revenue quietly, partly because fixing it is politically awkward. For now it is simply a feature of the landscape to plan around.
Frequently asked questions
Between £100,000 and £125,140, the personal allowance is withdrawn by £1 for every £2 earned. Combined with 40% income tax, this produces an effective 60% marginal rate on income in that band.
About £68,557 a year, or roughly £5,713 a month, before pension or student loan. Income above £100,000 is taxed far more harshly because of the allowance taper.
It starts reducing above £100,000 and is fully gone by £125,140, where you become a full additional-rate taxpayer.
A pension contribution reduces your adjusted net income. Paying enough to bring it back to £100,000 restores your personal allowance and delivers around 60% effective relief — one of the best-value moves available.
Yes. Crossing £100,000 also removes the 30 funded childcare hours and Tax-Free Childcare, so parents have an extra reason to keep adjusted income at or below the threshold.
Figures are 2025/26 estimates for England, Wales and Northern Ireland; Scotland sets its own bands. Treat take-home figures as a guide and take advice on large pension contributions.