The £100k Personal Allowance Tax Trap
Earn between £100,000 and £125,140 and you face an effective 60% tax rate as your personal allowance is clawed back. Find out how it affects you, and what to do about it.
Use the CalculatorInformation only. This calculator is for informational purposes only. It does not constitute financial, tax or investment advice. All figures are estimates based on 2025/26 tax year rates for England, Wales and Northern Ireland and may not reflect your individual circumstances. Tax rules are subject to change. Nothing on this site should be relied upon as a basis for making financial decisions. Please speak to a qualified financial adviser or tax specialist before taking any action.
How the £100k tax trap works
For every £2 you earn above £100,000, you lose £1 of your £12,570 tax-free personal allowance. By the time your income reaches £125,140, the allowance is gone entirely. This creates an effective 60% marginal tax rate (40% income tax on your earnings, plus another 20% from the lost allowance being taxed) without any official tax band ever being called "60%".
Example calculation at £110,000: The £10,000 above £100,000 triggers a £5,000 reduction in your personal allowance. That £5,000 of previously tax-free income would attract 40% tax, adding £2,000 to the tax bill. Combined with the £4,000 of higher-rate tax on the £10,000 itself, the total tax on that £10,000 could be £6,000, an effective rate of 60%.
Some people in this position explore whether pension contributions or Gift Aid donations may reduce their adjusted net income. Use the calculator below to see the numbers for your situation, and speak to a qualified financial adviser before making any decisions.
Find out exactly where you stand
Enter your income details below and the calculator will show you:
- An estimate of your adjusted net income and whether it may fall within the 60% trap band
- An illustrative effective marginal tax rate on additional income
- An estimate of how much personal allowance may remain
- Estimated income tax, National Insurance, and take-home pay figures
- An indication of childcare entitlements that may be affected if you have young children
This calculator is for informational purposes only. It does not constitute financial, tax or investment advice. All figures are estimates based on 2025/26 tax year rates for England, Wales and Northern Ireland and may not reflect your individual circumstances. Tax rules are subject to change. Nothing on this site should be relied upon as a basis for making financial decisions. Please speak to a qualified financial adviser or tax specialist before taking any action.
Receiving any NI credits? (select all that apply)
Receiving any NI credits? (select all that apply)
Frequently Asked Questions
Everything you need to know about the £100k tax trap
What is the £100k tax trap?
The £100k tax trap, sometimes called the 60% tax trap, is a quirk of the UK tax system that creates an effective marginal income tax rate of 60% for people earning between £100,000 and £125,140.
It happens because the UK's £12,570 personal allowance (the amount you can earn before paying any income tax) is gradually withdrawn once your income exceeds £100,000. For every £2 you earn above £100,000, you lose £1 of your personal allowance. By the time your income reaches £125,140, your personal allowance has been reduced to zero entirely.
This withdrawal of the personal allowance is stacked on top of the 40% higher-rate tax you are already paying on those earnings, creating an effective rate of 60p in every £1, without any formal tax band ever being labelled "60%".
How does the £100k tax trap affect me?
If your adjusted net income falls between £100,000 and £125,140, you are caught in the trap. Here is the maths in plain terms:
- You are already paying 40% higher-rate tax on income above £50,270, so 40p goes on every extra £1 you earn.
- Because you earn £10,000 above £100,000, your personal allowance is reduced by £5,000 (£1 lost for every £2 earned over £100k).
- That £5,000 of previously tax-free allowance would become taxable at 40%, potentially adding £2,000 to the tax bill.
- Spread across the £10,000 of extra earnings: £4,000 (40%) + £2,000 (allowance clawback) = £6,000 tax on £10,000 earned, an effective rate of 60%.
This can even catch people whose base salary sits just below £100,000 but who receive a bonus, commission, or one-off payment that tips them over the threshold, even temporarily within a single tax year.
Is the £100k tax trap based on net income or gross income?
The trap is triggered by your adjusted net income (ANI), which is neither your raw gross salary nor your take-home pay, but a specific HMRC calculation that sits somewhere in between.
HMRC defines adjusted net income as your total taxable income (from all sources) minus certain allowable deductions:
- Pension contributions: payments into a pension scheme that receives tax relief, either via Relief at Source (grossed up) or salary sacrifice (deducted before your P60 figure)
- Gift Aid donations: charitable donations made through Gift Aid, also grossed up by HMRC
- Trading losses: if applicable
- Other qualifying deductions as permitted by HMRC
This distinction may be significant: it means it could be possible to reduce your adjusted net income, and therefore potentially reduce the impact of the trap, by making additional pension contributions or Gift Aid donations, without reducing your gross salary. A qualified financial adviser can help you understand what may be applicable in your circumstances.
Can I still get government-funded childcare when I earn over £100k?
Based on current HMRC rules, once either parent's adjusted net income exceeds £100,000, the household may lose eligibility for government-funded childcare support. This is an area worth understanding if you have young children:
Based on current rules, only one parent needs to breach the £100,000 threshold for the household potentially to lose these entitlements, even if the other parent earns nothing or earns well below the threshold. Eligibility rules can change and individual circumstances may vary, so it is worth checking your position with HMRC or a qualified adviser.
For a family with two young children, losing Tax-Free Childcare alone could cost £4,000 per year. Combined with the potential tax impact on the income that pushed adjusted net income above £100,000, the overall financial position of those earning slightly above the threshold can be complex. A financial adviser can help you understand the full picture.
What approaches do some people consider to reduce their adjusted net income?
Some people in this position look at reducing their adjusted net income below £100,000, which may help recover some or all of the personal allowance and potentially reduce the effective marginal rate. The approaches below are commonly considered, but the right combination will depend on your personal circumstances. Speaking with a qualified financial adviser before taking any action is advisable.
Contributions to a pension may reduce your adjusted net income. Inside the trap, pension contributions may attract 40% tax relief, depending on your circumstances, meaning the government may effectively top up part of your contribution. You may be able to contribute via Relief at Source or salary sacrifice. The annual allowance is currently £60,000, and unused allowance from the three prior tax years may be available to carry forward. You can use our calculator to see how pension contributions affect your adjusted net income. Speak to a financial adviser to understand what applies to you.
Donations to charity through Gift Aid are grossed up by HMRC, which may extend your basic rate band and reduce your adjusted net income. For example, a £1,000 cash donation becomes a £1,250 grossed-up deduction. This might help to reduce your adjusted net income if you already make regular charitable donations. Speak to a financial adviser to understand whether this may be applicable to your circumstances.
If your employer offers salary sacrifice arrangements (for electric cars, cycle-to-work, gym membership, private health insurance, or additional pension) participating may reduce your gross salary before it hits your P60. This could lower both your adjusted net income and your National Insurance liability, depending on your circumstances and the arrangements your employer offers. Speak to your employer or a financial adviser to understand what may be available and applicable to you.
Where a bonus or one-off payment may push adjusted net income above £100,000, some people explore whether it might be possible to spread the payment across two tax years. Depending on the employer's policies and the nature of the payment, this could mean neither year's adjusted net income necessarily breaches the threshold. Whether this is possible will depend on your employer and individual circumstances. A financial adviser or tax specialist can help you understand the implications.