The 60% tax trap between £100,000 and £125,140

Where the 60% comes from

The personal allowance for 2026/27 is £12,570. GOV.UK reduces it by £1 for every £2 of adjusted net income above £100,000. The allowance is gone at £125,140, because £25,140 of income above £100,000 removes £12,570 of allowance. Between those two points, each extra £2 of income is taxed and also drags £1 of previously tax-free income into tax.

In England, Wales and Northern Ireland that newly exposed pound is taxed at the higher rate of 40%, and the extra pound of income is taxed at 40% as well. The combined income-tax cost of the extra £2 is £1.20, which is 60%. The additional rate of 45% starts only once taxable income is above £125,140. The trap is the band before that, and it is an income-tax effect. National Insurance on earnings above the upper earnings limit is charged at 2%, so the all-in deduction on a salary in this band is higher still, but the “60%” name refers to the income tax.

Three salaries, same rules

These three bills are what the income tax calculator produces for employment income in England, Wales or Northern Ireland, when adjusted net income equals the salary and there is no pension. At £100,000 the allowance is still £12,570. Taxable income is £87,430. The basic-rate slice of £37,700 costs £7,540 and the rest, at 40%, costs £19,892. Income tax is £27,432.

At £110,000 the allowance has fallen by £5,000, to £7,570. Taxable income is £102,430. Income tax is £33,432. The extra £10,000 of salary has cost £6,000 of income tax. That is the 60% in cash, not as a slogan.

At £125,140 the allowance is zero. Income tax is £42,516. From £100,000 to £125,140 the extra income is £25,140 and the extra tax is £15,084, which is 60% of that slice. A salary of £125,141 is the first pound on which the allowance cannot fall any further. Scottish income tax uses different bands on the same personal allowance, so this 60% description is the rest of the UK. Do not copy the pounds onto a Scottish code.

What adjusted net income is doing

The taper watches adjusted net income, not the number on the contract. Gift-aid donations and tax relief on pension contributions are among the deductions that bring it down. A trading loss or certain other reliefs can do the same. This page only follows the pension route, because that is the one the pension calculator measures. The High Income Child Benefit Charge is a separate taper, from £60,000 to £80,000, and it is worked out on the Child Benefit charge calculator. Tax-free childcare has its own income limit, which is not stored here.

The annual allowance on pension contributions, and the tapered annual allowance, are also not stored. GOV.UK publishes them on its annual-allowance page. A contribution that looks helpful for the personal allowance can still be too large for the annual allowance. This guide does not invent that limit, and the calculator will not warn you about it.

Salary sacrifice and net pay

A net-pay or salary-sacrifice contribution is deducted before tax. Put £10,000 of gross contribution against the £110,000 salary and both taxable pay and adjusted net income fall to £100,000. The allowance is restored to £12,570 and income tax falls from £33,432 to £27,432. The income-tax saving is £6,000, on a contribution of £10,000.

Salary sacrifice also reduces National Insurance pay. On an annual earnings period the Class A employee charge at £110,000 is £4,210.60, and at £100,000 it is £4,010.60, so the sacrifice saves £200 of employee National Insurance. That slice sits above the upper earnings limit of £50,270, where the employee rate is 2%, which is why the NI saving is £200 and not 8% of £10,000. A net-pay arrangement reduces income tax in the same way and does not reduce employee National Insurance. From 6 April 2029, salary-sacrifice pension contributions above £2,000 a year are due Class 1 National Insurance. That rule is not in force for 2026/27 and the calculator does not apply it.

Relief at source is a different bill

A relief-at-source scheme works from pay that has already been taxed. On a £10,000 gross contribution you pay £8,000 and the provider claims basic-rate relief of £2,000, which is the 20% basic rate. Adjusted net income still falls by the gross £10,000, so the personal allowance is restored. The extra relief, above the 20% the provider has claimed, is claimed through Self Assessment or a tax-code change.

The pension calculator measures that extra relief as the full income-tax saving of a net-pay contribution, minus the basic-rate relief already in the pot. On these figures the full saving is £6,000 and the basic-rate piece is £2,000, so the extra relief is £4,000. Income tax after that claim is £29,432, compared with £33,432 if you make no contribution. You have also put £10,000 into the pension at a cash cost of £8,000. Adding the provider’s £2,000 on top of the £4,000 would count the basic-rate relief twice.

Open the pension contribution calculator and set the salary to £110,000 if you want the three methods side by side. The income tax calculator is the no-pension bill. The take-home pay calculator adds National Insurance and, if you select them, student loan plans.

What people round away

The 60% is income tax on non-savings, non-dividend income for the rest of the UK. Dividend and savings rates are different, and the personal savings allowance is not part of this sum. A bonus paid in March can push adjusted net income over £100,000 for a single year even when the monthly salary looks safely under it. The taper uses the year’s income.

A contribution has to be made in a way that actually reduces adjusted net income for that tax year. Paying it in the next tax year does not repair this year’s allowance. The calculator assumes the percentage you type is the contribution for the year you are looking at. It does not know your annual allowance, your employer’s matching rules, or whether the scheme is relief at source.

How it's calculated

The Personal Allowance is £12,570. Once adjusted net income passes £100,000, the allowance falls by £1 for every £2 of income above that limit. It is gone at £125,140. Losing allowance at that rate, on income that is also taxed at 40%, is the 60% effective band. The income tax function on this site applies that taper before it fills the bands.

Worked examples

At £90,000, which is under the limit, the allowance stays £12,570.00 and income tax on employment income is £23,432.00.

At £110,000 the income is £10,000 over the limit, so £5,000 of allowance is lost. The remaining allowance is £7,570.00 and income tax is £33,432.00.

At £125,140 the allowance is £0.00. Income tax on that employment income is £42,516.00. A pension contribution that brings adjusted net income back towards £100,000 restores allowance. The take-home calculator shows that for a salary-sacrifice or relief-at-source contribution.

Related guides

The charge that starts at £60,000 is covered in the High Income Child Benefit Charge guide. A pension that can pull income back under £100,000 is covered in the salary sacrifice pensions guide.

Tools for this

• Work out 2026/27 income tax, including the personal allowance taper
• Compare salary sacrifice, net pay and relief at source on the same salary
• See take-home pay after income tax and National Insurance