The £100,000 tax trap: why you pay 60%
Reviewed by ClearPayslip editorial teamUpdated on Methodology
Short answer
Between £100,000 and £125,140 of adjusted net income you lose £1 of Personal Allowance for every £2 you earn, so each extra £100 costs £40 of tax plus £20 more on the lost allowance: an effective 60% Income Tax rate (62% with National Insurance). In Scotland it is 67.5% (69.5%).
Key facts
- Taper starts:£100,000 of adjusted net income.
- Personal Allowance reaches zero:£125,140.
- Effective rate in the band:60% Income Tax + 2% National Insurance.
- Scotland:67.5% Income Tax + 2% National Insurance.
| Salary | Personal Allowance | Take-home (E, W, NI) | Marginal rate | Take-home (Scotland) | Marginal rate |
|---|---|---|---|---|---|
| £100,000 | £12,570 | £68,557 | 62% | £65,257 | 70% |
| £105,000 | £10,070 | £70,457 | 62% | £66,782 | 70% |
| £110,000 | £7,570 | £72,357 | 62% | £68,307 | 70% |
| £115,000 | £5,070 | £74,257 | 62% | £69,832 | 70% |
| £120,000 | £2,570 | £76,157 | 62% | £71,357 | 70% |
| £125,140 | £0 | £78,111 | 47% | £72,925 | 50% |
| £130,000 | £0 | £80,686 | 47% | £75,355 | 50% |
Marginal rates include Income Tax and National Insurance on the next £100 of salary, with no pension contributions.
£110,000 a year → £6,030 a month after tax
Solid line: England, Wales and NI. Dashed line: Scotland. Shaded: Personal Allowance withdrawal (£100,000–£125,140).
How a pension contribution gets the allowance back
Adjusted net income is your income minus pension contributions (and Gift Aid). On a £110,000 salary, paying £10,000 into a workplace pension under a net pay arrangement brings it back to £100,000, restoring the full £12,570 allowance. Your take-home pay falls from £72,357 to £68,357: £4,000 for £10,000 in your pension, a net cost of 40p per pound.
With a relief-at-source personal pension you claim the extra relief through Self Assessment instead; with salary sacrifice you also save 2% National Insurance. Childcare support such as Tax-Free Childcare and, in England, 30 hours of free childcare is also lost above £100,000 of adjusted net income, which makes the trap steeper for parents.
Frequently asked questions
Is the 60% tax rate real?
It is not an official rate, but it is the effective result of the Personal Allowance taper: in the £100,000–£125,140 band each extra £1 increases your tax by 60p.
Does a pay rise ever reduce my take-home pay?
No. Even at 60% (or 69.5% with National Insurance in Scotland) you keep part of every extra pound.
Do I need to file a tax return?
Not just because of the taper if all your income is taxed through PAYE, but HMRC will adjust your tax code. You must file Self Assessment if your income is over £150,000 or you claim higher-rate relief on personal pension contributions.