UK Tax Hub/ The £100k Tax Trap
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The £100k Tax Trap

60% effective marginal rate — how it works and how to escape it

Your Salary

£
%

In the Trap

Taxable Income£110,000.00
Effective Rate33.3%
Marginal Rate42.0%
Income Tax£32,432.00

Increase pension to 9.5% to escape the trap and save £5,180.00 in tax.

Related Calculators

Salary Sacrifice Calculator
Bonus Tax Calculator
£100,000 After Tax
£120,000 After Tax

Gross Salary

£110,000.00

per year

£9,166.67 per month

Take-Home Pay

£73,357.40

per year

£6,113.12 per month

Per Month

£6,113.12

Income Tax

£32,432.00

Marginal Rate

42.0%

Effective Rate

33.3%

ItemAnnually (£)Monthly (£)Weekly (£)Daily (£)
Gross Salary110,000.009,166.672,115.38423.08
Income Tax32,432.002,702.67623.69124.74
National Insurance4,210.60350.8880.9716.19
Take-Home Pay73,357.406,113.121,410.72282.14

You Are in the 60% Tax Trap

Your taxable income of £110,000.00 is within the Personal Allowance taper zone (£100,000–£125,140). You are losing £5,000.00 of your Personal Allowance, costing an extra £2,000.00 in income tax.

Escape Strategy

Increase your pension contribution by 9.5% (to 9.5% total) to bring your taxable income below £100,000. This would save £5,180.00 in income tax, and your take-home pay would be £68,087.40 — only £5,270.00 less than now, despite paying £10,450.00 more into your pension.

The UK £100k Tax Trap Explained

The UK Personal Allowance — currently £12,570 — is the amount of income you can earn before paying any income tax. However, for every £2 you earn above £100,000, HMRC withdraws £1 of this allowance. By the time your income reaches £125,140, the allowance is completely gone.

This taper creates a hidden tax rate of 60% on income between £100,000 and £125,140. Here is why: you pay 40% Higher Rate tax on the income itself, and you also lose allowance that would have been tax-free — effectively paying an additional 20% on the lost allowance. The combined effect is 60p of every extra pound going to HMRC.

Worked Example

Salary£110,000
Income above £100k£10,000
Personal Allowance lost£5,000 (£10,000 ÷ 2)
Tax on £10,000 at 40%£4,000
Tax on lost £5,000 PA at 40%£2,000
Total extra tax£6,000 on £10,000 = 60%

Frequently Asked Questions

For guidance only. Rates based on 2025/26 HMRC figures for England, Wales, Northern Ireland and Scotland. Does not account for all reliefs or complex PAYE situations. Consult a qualified tax adviser for personalised advice.

The UK £100k Tax Trap — Why You Pay 60% Tax Between £100,000 and £125,140

The £100k tax trap is one of the most significant — and least well-understood — features of the UK tax system. Between £100,000 and £125,140, the effective marginal Income Tax rate is 60%, not 40% as many people assume. This happens because the Personal Allowance (£12,570) is gradually withdrawn at a rate of £1 for every £2 of income above £100,000. This withdrawal of the allowance effectively creates an additional 20% tax charge on top of the 40% Higher Rate, resulting in a combined 60% marginal rate. Use the calculator above to see exactly how this affects your take-home pay and how pension contributions can help you escape the trap.

Personal Allowance Taper Calculator — How the 60% Rate Is Created

The mechanism behind the 60% rate is the Personal Allowance taper. For every £2 of income above £100,000, £1 of Personal Allowance is lost. Since the Personal Allowance is taxed at 0% and the income replacing it is taxed at 40%, each £1 of lost allowance creates an additional 40p of tax. Combined with the 40% Higher Rate tax on the income itself, the total tax on each additional £2 of income is £1.20 — an effective rate of 60%.

Income RangeNominal RatePA Taper EffectEffective Marginal Rate
Up to £12,5700%None0%
£12,571 – £50,27020%None20%
£50,271 – £100,00040%None40%
£100,001 – £125,14040%+20% (PA withdrawal)60%
Above £125,14045%None (PA fully gone)45%

How to Avoid the 60% Tax Rate UK — Pension Contributions as the Escape Route

The most effective way to avoid the £100k tax trap is to reduce your adjusted net income below £100,000 through pension contributions. Pension contributions (whether via salary sacrifice or personal contributions with relief at source) reduce your adjusted net income, which is the figure HMRC uses to calculate the Personal Allowance taper. By contributing enough to bring your income below £100,000, you can restore your full Personal Allowance and escape the 60% zone entirely. The table below shows the pension contribution required to escape the trap at different income levels.

Gross IncomeAmount in 60% ZonePension Needed to EscapeNet Cost of PensionTax Saved
£105,000£5,000£5,000£2,000£3,000
£110,000£10,000£10,000£4,000£6,000
£115,000£15,000£15,000£6,000£9,000
£120,000£20,000£20,000£8,000£12,000
£125,140£25,140£25,140£10,056£15,084

The net cost column shows how much your take-home pay is reduced by the pension contribution. Because each £1 contributed saves 60p in tax (in the 60% zone), a £10,000 pension contribution only reduces your take-home pay by £4,000 — while adding £10,000 to your pension pot. This is an exceptional return on a pension contribution.

UK Tax Trap — Other Strategies Beyond Pension Contributions

While pension contributions are the most straightforward solution, there are other ways to manage income in the £100k–£125,140 zone. Gift Aid donations to registered charities extend your basic rate band and reduce your adjusted net income, providing the same taper-relief benefit as pension contributions. Salary sacrifice for other benefits (such as electric vehicles or cycle to work) also reduces adjusted net income. Timing of income — for example, deferring a bonus or accelerating pension contributions in a high-income year — can also help. Additionally, if you are married or in a civil partnership, consider whether income-splitting strategies (such as transferring income-producing assets to a lower-earning spouse) could help keep both partners below the £100,000 threshold.

Frequently Asked Questions

Why do I pay 60% tax on income between £100,000 and £125,140?
The 60% effective rate arises because the Personal Allowance (£12,570) is withdrawn at a rate of £1 for every £2 of income above £100,000. Each £1 of Personal Allowance withdrawn means you pay 40% tax on income that was previously tax-free. Combined with the 40% Higher Rate tax on the additional income itself, the total tax on each £2 of income in this range is £1.20 — an effective rate of 60%.
How much pension do I need to contribute to avoid the 60% tax trap?
You need to contribute enough to bring your adjusted net income below £100,000. If your gross income is £110,000, you need to contribute at least £10,000 to a pension (gross). If contributing via salary sacrifice, the full £10,000 reduces your adjusted net income. If contributing personally (relief at source), you pay £8,000 and the pension provider claims £2,000 basic rate relief — but you must also claim the additional 20% relief through Self Assessment.
Does the £100k tax trap affect Child Benefit?
Yes. The High Income Child Benefit Charge (HICBC) applies to households where one partner earns more than £60,000 (from April 2024, raised from £50,000). The charge is 1% of the Child Benefit amount for every £200 of income above £60,000, and the full benefit is clawed back at £80,000. This creates an additional effective marginal rate for families with children in the £60,000–£80,000 range, on top of the standard tax and NI rates.
Can I use Gift Aid to escape the £100k tax trap?
Yes. Gift Aid donations to registered charities reduce your adjusted net income for the purpose of the Personal Allowance taper. A £1,000 Gift Aid donation reduces your adjusted net income by £1,250 (because the charity reclaims basic rate tax relief, grossing up the donation). If your income is in the £100k–£125,140 zone, each £1,250 reduction in adjusted net income saves 60p × £1,250 = £750 in tax, while the donation itself costs you £1,000 net — an effective 75% tax relief on the donation.