The £100K Tax Trap Explained (2026/27)
What is the £100K tax trap?
When your income crosses £100,000, HMRC begins removing your Personal Allowance — the tax-free portion of your earnings. For every £2 you earn above £100,000, you lose £1 of your Personal Allowance. By £125,140, it has gone entirely.
This taper creates an effective marginal tax rate of 60% on income between £100,000 and £125,140: you pay the 40% Higher Rate on that income plus an extra 20% because the lost allowance is also being taxed for the first time. Add National Insurance at 2% and the effective rate is approximately 62%.
Worked examples
The table below shows how income tax changes at three salary points around the trap zone, using 2026/27 rates with no pension or student loan deductions.
| Gross Salary | Personal Allowance | Income Tax | NI | Take-Home |
|---|---|---|---|---|
| £99,999 | £12,579 | £27,430 | £4,011 | £68,559 |
| £110,000 | £7,579 | £33,428 | £4,210 | £72,361 |
| £125,140 | £9 | £42,512 | £4,513 | £78,114 |
Note: earning £25,140 more (from £99,999 to £125,140) increases take-home pay by only £9,556.
How to escape the trap
The most effective mitigation is to make pension contributions that reduce your adjusted net income below £100,000:
1. Salary sacrifice pension contributions. Ask your employer to redirect part of your salary into your pension before it reaches your payslip. This reduces your gross salary and therefore your adjusted net income, NI liability, and income tax simultaneously. For every £1 sacrificed in the trap zone, you effectively get back approximately £0.62 in tax and NI relief. Use the salary sacrifice calculator to model the exact saving.
2. Gift Aid donations. Charitable donations made under Gift Aid also reduce your adjusted net income. If you already give to charity, ensuring those donations are Gift Aid eligible can help restore your Personal Allowance.
Try the full calculator with a £100,000 salary and add pension contributions to see the impact in real time.
Frequently asked questions
What is the £100K tax trap?
When your income exceeds £100,000, your Personal Allowance is tapered away at £1 for every £2 earned over the threshold. This means the income in the £100,000–£125,140 range is effectively taxed at 60% (40% Higher Rate plus 20% from the lost allowance). Including National Insurance, the effective rate is approximately 62%.
What income range does the 60% rate apply to?
The 60% effective marginal rate applies to income between £100,000 and £125,140. At £125,140 the Personal Allowance reaches zero and the rate returns to the standard 45% Additional Rate on income above that level.
How can I escape the £100K tax trap?
The most effective strategy is to make pension contributions that reduce your adjusted net income below £100,000. Salary sacrifice pension contributions are particularly efficient because they also reduce National Insurance. Gift Aid donations also reduce your adjusted net income and can help restore the Personal Allowance.
Does the £100K trap apply in Scotland?
Yes. The Personal Allowance taper is a UK-wide rule. Scottish taxpayers face the same taper, but the effective marginal rate in Scotland is higher because the Higher Rate in Scotland is 42% (not 40%), making the effective rate approximately 63% (plus NI).
Does salary sacrifice help with the £100K trap?
Yes. Salary sacrifice reduces your gross salary before tax and NI are calculated, which directly reduces your adjusted net income. If salary sacrifice brings your income below £100,000, the Personal Allowance is fully restored, eliminating the trap. For every £2 sacrificed between £100,000 and £125,140, you effectively save approximately £1.24 in tax and NI.
What about free childcare and the £100K threshold?
Losing 30 hours of free childcare is an additional financial impact for parents earning over £100,000. The childcare entitlement is lost if either parent earns over £100,000. This makes pension contributions to bring income below the threshold even more valuable for families.