The 60% tax trap between £100,000 and £125,140
The short answer
Once your income passes £100,000, you lose £1 of your tax-free Personal Allowance for every £2 you earn, until it's gone at £125,140. Each extra £100 you earn in that range is taxed at 40% itself and costs you £50 of allowance, which is then taxed at 40% too — so £60 goes in Income Tax and another £2 in National Insurance. You keep £38 of every £100. In Scotland, where the rate in that range is 45%, you keep £30.50.
How it works
Most people have a Personal Allowance of £12,570: the first £12,570 of income is tax-free. Above £100,000 of adjusted net income (your taxable pay, minus anything you've put into a pension) the allowance shrinks by half of whatever you earn over £100,000. At £110,000 it's £7,570; at £125,140 it's nothing.
So a pay rise in this range does two things at once: the rise itself is taxed at the 40% higher rate, and it drags an extra slice of previously tax-free income into tax, also at 40% — which adds up to 60%. There's no tax band officially called 60%; it's what happens when those two rules combine, which is why it catches people out.
Worked example
An employee in England on a salary, with no pension contributions, in 2026/27:
| Salary | Personal Allowance | Income Tax | National Insurance | Take-home |
|---|---|---|---|---|
| £100,000 | £12,570 | £27,432 | £4,011 | £68,557 |
| £110,000 | £7,570 | £33,432 | £4,211 | £72,357 |
| £125,140 | £0 | £42,516 | £4,513 | £78,111 |
The £10,000 rise from £100,000 to £110,000 adds £6,000 of Income Tax and £200 of National Insurance, so take-home goes up by just £3,800.
Getting the allowance back with pension contributions
Pension contributions reduce adjusted net income, so they bring the allowance back pound for pound. Put the £10,000 above into a pension by salary sacrifice and your taxable pay drops back to £100,000 — your full £12,570 allowance returns, and your take-home is £68,557.
That's £10,000 more in your pension for £3,800 less take-home pay: in effect, 62% tax relief. Through an auto-enrolment (net pay) scheme it costs £4,000, because salary sacrifice also saves the 2% National Insurance and net pay doesn't. A personal pension paid under relief at source works too, but you have to claim the higher-rate relief yourself through Self Assessment.
Two limits to keep in mind. Your total pension contributions, including your employer's, count against the annual allowance — £60,000 for most people. And salary sacrifice can't take your pay below the National Minimum Wage.
The childcare cliff edge
If you have young children, £100,000 matters for another reason. You can't get Tax-Free Childcare — worth up to £2,000 a year per child — if either parent's adjusted net income is over £100,000. In England the same limit applies to the funded childcare hours for working parents. Unlike the tax trap, these are lost all at once: £1 over the limit and the whole entitlement goes.
That makes a pension contribution that keeps adjusted net income at or under £100,000 worth considerably more than the tax saving alone.
Other things to know
Bonuses count. A one-off bonus that takes you over £100,000 triggers the taper for that tax year, even if your salary is below it. Paying the bonus into your pension by salary sacrifice, where your employer allows it, avoids that.
It's the whole year that counts. The allowance is worked out on your income for the tax year, not month by month, so the full effect often only shows up in your final payslips or a tax code change.
Child Benefit is already gone. The High Income Child Benefit Charge takes back all Child Benefit once adjusted net income reaches £80,000, so at these incomes there is nothing more to lose there — if your income is closer to that range instead, see the Child Benefit tax trap, explained.