Guide · tax year 2026/27
The £100,000 tax trap
Why income between £100,000 and the point where your Personal Allowance runs out is taxed so heavily, and what reduces it.
Once your income goes over £100,000, something unusual happens: you start losing your tax-free Personal Allowance. For a band of income above that level, each extra pound you earn is taxed far more heavily than the headline rates suggest. This is often called the £100,000 tax trap. This guide explains how it works, using 2026/27 figures.
How the allowance is withdrawn
Your Personal Allowance of £12,570 goes down by £1 for every £2 of adjusted net income above £100,000 (GOV.UK: income over the limit). That is 50% of every pound over the limit. The allowance reaches zero when your income is twice the allowance above the limit.
At £125,140 the allowance is £0.
Why the rate is so high
In this band, each extra pound of income does two things. It is taxed at the higher rate of 40%. And it takes away half a pound of tax-free allowance, which means another half a pound of your income becomes taxable at the higher rate too. The two together make an effective income tax rate of well over the higher rate.
Our salary calculator shows the result. On £110,000, 62% of your next pound goes in income tax and National Insurance together. Compare that with £125,140, where the allowance has already gone and the next pound is taxed at the additional rate plus National Insurance.
A worked example
Compare two salaries:
- On £100,000, the Personal Allowance is £12,570 and income tax is £27,432.00.
- On £110,000, the allowance is £7,570 and income tax is £33,432.00.
The extra £10,000 of pay brings £6,000.00 more income tax and £200.00 more National Insurance. Take-home pay rises by only £3,800.00.
What counts as income
The test uses your adjusted net income, not just your salary. Adjusted net income is total taxable income before any Personal Allowances and less certain tax reliefs (GOV.UK: adjusted net income). It includes things like dividends and other income as well as your salary, and it is reduced by some pension contributions and Gift Aid.
How a pension contribution can help
Because the test uses adjusted net income, paying into a pension in a way that reduces it can bring back some or all of your allowance. Through salary sacrifice or a net pay arrangement, the contribution comes off before income tax.
For example, on a salary of £110,000, sacrificing £10,000 into a pension restores the allowance to £12,570. Take-home pay falls by £3,800.00, much less than the £10,000 that goes into the pension. Whether this suits you depends on your circumstances; it is not advice. See salary sacrifice or net pay?
Bonuses and the trap
A bonus that takes your income over £100,000 is caught by the same rule, which is why a bonus can feel heavily taxed. Our bonus tax calculator shows how much you keep, and how bonuses are taxed explains why.
Scotland
The same taper applies to Scottish taxpayers (GOV.UK: Scottish Income Tax), though the Scottish rates in this band are different. See Scottish income tax explained.
Child Benefit and the same income
Many families in this income range also pay back their Child Benefit, which starts at a much lower income. See the Child Benefit £60,000 rule.
The trap in numbers
This table shows the Personal Allowance and the marginal rate (income tax plus National Insurance on the next pound) at salaries either side of the trap:
| Salary | Personal Allowance | Take-home | Marginal rate |
|---|---|---|---|
| £95,000 | £12,570 | £65,657.40 | 42% |
| £100,000 | £12,570 | £68,557.40 | 62% |
| £105,000 | £10,070 | £70,457.40 | 62% |
| £115,000 | £5,070 | £74,257.40 | 62% |
| £125,140 | £0 | £78,110.60 | 47% |
| £130,000 | £0 | £80,686.40 | 47% |
Below the limit and above the point where the allowance is gone, the marginal rate is lower than inside the trap. That is the odd shape of the trap: people earning inside it lose a bigger share of a pay rise than people earning more than them.
A pay rise or bonus inside the trap
Suppose you earn £95,000 and get a £10,000 bonus. Part of the bonus is taxed at the higher rate, and part also falls inside the taper, where you lose Personal Allowance as well. You keep £4,800.00, which is 48% of the bonus. Gift Aid donations also reduce adjusted net income, as GOV.UK's definition explains, so they work in a similar way to pension contributions for this test.
Checking where you stand
If your income is close to £100,000, add up everything that counts towards adjusted net income, not just your salary: dividends, other income and a bonus if one is due. Then take off the pension contributions and Gift Aid that reduce it. That total, not your headline salary, decides whether the trap applies.
Common questions
Am I worse off earning more?
No. Even at the highest marginal rate in this band, you keep part of each extra pound. You just keep much less than usual.
Where can I see my own figures?
Use the salary calculator. Its band-by-band breakdown shows your Personal Allowance and your marginal rate.
General information for the 2026/27 tax year, not financial or tax advice. We are not HMRC. Found a mistake? See our corrections policy.