The £100k tax trap explained — the UK 60% marginal rate

UK income tax officially runs at 20%, 40% and 45%. But the headline rates hide a strange ridge: between £100,000 and £125,140 of adjusted net income, the effective marginal rate is roughly 60%. Take a £1,000 pay rise in that band and you might keep around £400 of it.

This is what the trap is, why it exists, and the most common workaround.

What the trap actually is

The standard UK personal allowance — the amount you can earn tax-free each year — is £12,570. This is the basic figure for everyone.

When adjusted net income passes £100,000, HMRC starts to reduce the personal allowance by £1 for every £2 over the threshold. The allowance is fully exhausted at £125,140 (the point where the £12,570 allowance has been tapered all the way to zero — £100,000 + £12,570 × 2).

Inside the £100,000–£125,140 band, the maths plays out as:

• 40% income tax is charged on the additional pound earned (it’s the higher-rate band).
• Plus 40% tax on £0.50 of the lost personal allowance — because each additional £1 reduces the allowance by £0.50, exposing that £0.50 to 40% tax that wasn’t previously charged.
• Total: 60p of tax on each additional £1 = a 60% marginal income tax rate.

Add employee NI at 2% in this band (it’s above the upper earnings limit) and the effective marginal rate becomes 62%.

HMRC’s detailed personal allowance guidance →

Why it exists

The £100,000 taper was introduced in 2010 by then-Chancellor Alistair Darling, partly as a revenue-raising measure following the financial crisis. The taper has been criticised regularly since — it creates the strangest marginal rate in the UK tax code, and it’s arbitrarily concentrated in a £25,140 income band.

It’s never been removed despite multiple consultations. The frozen thresholds since 2021 have made it bite more people each year, as nominal wage growth pushes more workers into the band.

What “adjusted net income” actually means

The taper applies to adjusted net income, not gross salary. The difference matters because it’s how the workaround works.

Adjusted net income is your total taxable income (salary, pension, dividends, rental, savings interest etc.) minus:

• Grossed-up pension contributions you made personally (i.e. the gross amount, not the net).
• Gift Aid donations.
• Some other less common deductions.

So a £105,000 salary with a £5,000 personal pension contribution gives an adjusted net income of £100,000 — back below the threshold, and the personal allowance is restored in full.

The pension contribution workaround

The most common response to the £100k trap is to use pension contributions to drop adjusted net income back below £100,000. The maths is unusually rewarding in this band because:

• The contribution gets full 40% tax relief (higher-rate band).
• Plus the restored personal allowance is itself taxed at 40%, so restoring it saves another 40% × £12,570 = £5,028 of tax.

Effective relief on a £25,140 pension contribution that takes someone from £125,140 to £100,000 of adjusted net income is roughly 60p in the pound — i.e. £25,140 of contribution costs roughly £10,000 of take-home, and lands £25,140 in the pension.

This is one of the most tax-efficient single transactions available to a UK earner.

The catch: the contribution gets locked into the pension wrapper until age 57+ (rising to 58 from April 2028). It’s a real cost — accessible cash now becomes inaccessible pension savings for decades.

Other workarounds

A few less common alternatives:

• Salary sacrifice into pension. Same maths, but achieved before the gross salary lands on a payslip. NI is also saved (employee 2% in this band; employer 15%, which some schemes pass through).
• Charity donations (Gift Aid). Donations are grossed up to reduce adjusted net income. Less common as a tax-planning tool but the mechanic is the same.
• Reduce taxable income directly. If a chunk of your income is bonus-dependent, accepting a smaller bonus and deferring is one option. Self-employed workers can sometimes time invoicing to manage which tax year income lands in.

What doesn’t work:

• ISA contributions. Don’t reduce adjusted net income. They’re great for long-term tax-free growth but don’t solve the £100k trap.
• Spreading income across multiple years. Income is taxed in the year it’s earned. Trying to defer salary into the next tax year usually isn’t possible.
• Reducing taxable salary by underclaiming benefits. Employer benefits-in-kind are added to taxable income via the P11D — there’s no real way to opt out.

The High Income Child Benefit Charge interaction

A separate but adjacent trap: the High Income Child Benefit Charge (HICBC) claws back child benefit when adjusted net income exceeds £60,000 (raised from £50,000 in 2024/25). At £80,000, the entire child benefit is clawed back.

For a parent with two children claiming child benefit (currently about £2,500 a year combined), the clawback adds another effective marginal tax burden in the £60,000–£80,000 band. Using pension contributions to drop adjusted net income below £60k can save the full child benefit and maintain ordinary higher-rate relief.

See our HICBC guide (coming soon) for the maths.

When the trap doesn’t hurt as much

A few situations where the 60% marginal rate is less of a sting:

• You’ve already maxed out the annual pension allowance. If you’ve hit the £60,000 cap, further pension contributions don’t reduce adjusted net income.
• You’re close to State Pension age and need accessible cash. Locking funds into a pension that you can’t access for 10–15 years is a real constraint.
• Your income is already above £125,140. Beyond that point, the personal allowance is fully exhausted — extra income is taxed at the 40% marginal rate (or 45% above £125,140), not 60%. Earning your way out of the trap is one option.

The income range to watch

For practical planning, the band to monitor is £100,000–£125,140 of adjusted net income. If your gross salary plus benefits, interest and dividends adds up to anywhere near this range, the £100k trap is in play.

Our take-home pay calculator lets you model the impact of pension contributions on your net income. For the specific decision about how much to contribute, a regulated adviser or MoneyHelper is the right next step.

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Last updated 22 May 2026. This guide is educational and is not personal financial advice. The personal allowance taper and HICBC thresholds are set by HMRC and can change between budgets — confirm on gov.uk before acting. See our disclaimer.