A pay rise that pushes you past £100,000 can feel like less of a win than the number suggests. The reason is a quirk in the way the UK withdraws the Personal Allowance, which produces a marginal rate of 60% on a slice of income that sits well below the point where the 45% additional rate begins. It is often called the 60% tax trap, and for the 2026/27 tax year it runs from £100,000 to £125,140 of income. This guide sets out exactly where the trap bites, what it costs, and the two moves that get you out of it.
Why the allowance disappears
Everyone starts with a Personal Allowance of £12,570, the first slice of income taxed at 0%. Once your income passes £100,000, that allowance is reduced by £1 for every £2 you earn above the line. By £125,140 the full £12,570 has gone, so there is no tax-free band left at all. The withdrawal has run since April 2010 and the £100,000 starting point has never been raised since, so each year of wage growth pulls more earners into it while the threshold stays put.
The effect on your marginal rate is the part that surprises people. In the band above £100,000 every extra £100 of salary is taxed at 40%, which is £40. But that same £100 also removes £50 of Personal Allowance, and that £50 was previously untaxed and is now taxed at 40%, adding another £20. So £100 of gross pay costs £60 in income tax. Add the 2% employee National Insurance that applies above the Upper Earnings Limit and the true marginal rate is 62%. You keep about 38p of each extra pound across this whole band.
What it costs in take-home pay
The table below shows take-home pay at points across and beyond the trap for England, Wales and Northern Ireland in 2026/27, after income tax and employee National Insurance. Scotland uses different income tax bands but the same Personal Allowance taper, so the mechanism is identical there.
| Gross salary | Income Tax | National Insurance | Take-home | Keep from the last band |
|---|---|---|---|---|
| £100,000 | £27,432 | £4,010.60 | £68,557.40 | reference point |
| £110,000 | £33,432 | £4,210.60 | £72,357.40 | £3,800 of £10,000 (38%) |
| £120,000 | £39,432 | £4,410.60 | £76,157.40 | £3,800 of £10,000 (38%) |
| £125,140 | £42,516 | £4,513.40 | £78,110.60 | £1,953 of £5,140 (38%) |
| £130,000 | £44,703 | £4,610.60 | £80,686.40 | £2,576 of £4,860 (53%) |
Notice the last column. A rise from £110,000 to £120,000 leaves you with only £3,800 of the £10,000. But a rise from £125,140 to £130,000, once the allowance is fully gone and there is nothing left to withdraw, hands back £2,576 of £4,860, which is 53%. In other words you keep more of each pound at £130,000 than at £120,000. The trap is a genuine spike in the marginal rate, not a smooth climb, and it eases once you are through it.
You can reproduce any of these lines with the UK salary calculator, which shows the income tax and National Insurance split for a figure you type in, or isolate the tax portion with the income tax calculator. To see how much of a specific rise survives the trap, the pay rise calculator does that one subtraction for you.
The childcare cliff on top
For parents of young children the band is harsher still. Tax-Free Childcare, worth up to £2,000 a year per child, and the funded hours of early-years childcare in England both stop once your adjusted net income passes £100,000, and they stop for each parent individually. Losing several thousand pounds of childcare support the moment you cross the line can push the effective cost of a pay rise above 100% for a while, meaning a bigger salary leaves a working parent worse off in cash terms until the raise is large enough to outrun the lost support. This is why the £100,000 mark matters far more to some households than the headline tax figures alone imply.
The way out: a pension contribution
The escape route is to bring your adjusted net income back below £100,000, and a pension contribution is the standard tool. Because the taper keys off adjusted net income, a gross pension contribution reduces the figure that HMRC measures against the threshold.
Take someone on £110,000 who pays £10,000 into a workplace pension by salary sacrifice, cutting their taxable salary to £100,000. Their take-home falls from £72,357.40 to £68,557.40, a drop of £3,800, yet £10,000 lands in their pension pot. So £3,800 of net pay has bought £10,000 of retirement savings, an effective relief of 62%. That is the most generous pension relief available anywhere in the UK system, and it exists precisely because the contribution both avoids the 40% band and restores the Personal Allowance the trap would otherwise remove. A personal pension outside salary sacrifice reaches a similar result: basic-rate relief is added at source, higher-rate relief is reclaimed, and the reduced adjusted net income restores the allowance. You can size a contribution and project the pot with the retirement savings calculator.
FAQ
Is the 60% rate a real tax band? No. There is no band on the HMRC rate card labelled 60%. It is the combined effect of paying 40% income tax while also losing 50p of tax-free allowance for every £1 earned above £100,000. Add 2% National Insurance and the true marginal figure is 62%.
Does the trap apply in Scotland? The Personal Allowance and its taper are set UK-wide, so the withdrawal between £100,000 and £125,140 applies in Scotland too. The income tax rates stacked on top differ, because Scotland sets its own bands, so the exact marginal figure is not 60% but the allowance still vanishes over the same range.
Does a bonus count? Yes. Bonuses, commission and most benefits in kind are part of the income that is measured against the £100,000 line, so a bonus that lifts you into the band is taxed at the same 60% effective rate on the portion inside it.
Can Gift Aid donations help like a pension does? Yes. Gift Aid donations also reduce adjusted net income, so charitable giving can pull you back under £100,000 in the same way a pension contribution does, though the cash leaves your household rather than staying in a pension.
Where exactly does the trap end? At £125,140. Above that the Personal Allowance is already zero, so there is nothing left to withdraw and the marginal rate drops back to 45% income tax plus 2% National Insurance.
These figures are estimates for guidance only and not financial advice. Your own position depends on your tax code, pension arrangements and any other income, so check against HMRC or an adviser before acting.