Last updated: October 2026 · For the 2026/27 tax year. Examples use the England, Wales and Northern Ireland Income Tax rates. General information, not personal tax, pension or financial advice.
The £100k tax trap is one of the strangest parts of the UK tax system. If your income is between £100,000 and £125,140, every extra pound you earn can be taxed at an effective rate of 60%. There’s no official 60% band. It happens because you slowly lose your tax-free Personal Allowance at the same time as paying 40% tax.
And if you have young children, the £100,000 line can matter even more, because of the childcare rules. In this guide I’ll explain, in plain English, how the trap works, what happens when a bonus pushes you over, how pensions fit in, and the childcare “cliff edge”, with simple worked examples.
Want your own numbers? Try my 60% Tax Trap Calculator.
The £100k tax trap in 30 seconds
| Income (adjusted net income) | What happens |
|---|---|
| £60,000 to £80,000 | The High Income Child Benefit Charge claws back Child Benefit (if you get it) |
| Over £100,000 | Tax-Free Childcare and England’s working-parent funded-hours eligibility ends |
| £100,000 to £125,140 | You lose £1 of Personal Allowance for every £2 earned, so the effective Income Tax rate is 60% |
| Over £125,140 | The Personal Allowance has gone, and income above £125,140 is taxed at the 45% additional rate |
The key number in every row is your adjusted net income, not just your salary. More on that below.
How the £100k tax trap works
Most people get a Personal Allowance of £12,570: income you don’t pay tax on. But once your adjusted net income goes over £100,000, HMRC takes away £1 of allowance for every £2 over the limit. At £125,140, it’s all gone.
Why the effective rate is 60%
Imagine you earn an extra £2 inside the trap:
- The £2 itself is taxed at 40%: 80p.
- You also lose £1 of Personal Allowance, so £1 that was tax-free is now taxed at 40%: 40p.
- Total Income Tax on that £2: £1.20. That’s 60%.
Add 2% employee National Insurance and you keep just 38p of every extra £1 in this range. (People sometimes call it a “62% tax rate”, but the 60% is the Income Tax part.)
Personal Allowance at each income level
| Adjusted net income | Allowance lost | Allowance left |
|---|---|---|
| £100,000 | £0 | £12,570 |
| £105,000 | £2,500 | £10,070 |
| £110,000 | £5,000 | £7,570 |
| £115,000 | £7,500 | £5,070 |
| £120,000 | £10,000 | £2,570 |
| £125,140 | £12,570 | £0 |
Worked example: £100,000 to £110,000
A £10,000 pay rise takes you from £100,000 to £110,000. You pay 40% on the £10,000 (£4,000). You also lose £5,000 of allowance, which is now taxed at 40% (another £2,000). That’s £6,000 of Income Tax on a £10,000 rise: 60%.
It’s not 60% on all your income
Only the slice between £100,000 and £125,140 is hit this way. And it’s a taper, not a cliff: going £1 over £100,000 doesn’t wipe out your whole allowance.
It’s adjusted net income, not just salary
This catches a lot of people out. A £99,000 salary doesn’t mean you’re safe. Your adjusted net income (ANI) starts with all your taxable income:
- Salary and bonuses
- Taxable benefits (like a company car)
- Savings interest and dividends
- Rental profits and self-employed profits
Then some things are taken off, such as certain pension contributions and Gift Aid donations (both “grossed up”). So someone on £99,000 with £3,000 of savings interest could already be at £102,000.
My adjusted net income guide walks you through the calculation step by step.
What if a bonus pushes you over £100k?
Bonus season is when most people discover the trap. There’s no special “bonus tax”. A bonus is just taxable income that can push your ANI for the year into the taper.
Example 1: £98,000 salary + £10,000 bonus
Your ANI becomes £108,000 (with no other income or adjustments). That’s £8,000 over, so you lose £4,000 of Personal Allowance and keep £8,570.
Example 2: £95,000 salary + £20,000 bonus
ANI £115,000: £15,000 over, so you lose £7,500 of allowance and keep £5,070.
Example 3: under £100k on paper
Salary plus bonus is £99,500. Looks safe? Add £2,000 of savings interest and ANI is £101,500, so the taper has started.
“I’ll lose 60% of my bonus” isn’t quite right
Part of a bonus may sit below £100,000 (taxed at 40%) and only part inside the taper. And because payroll uses tax codes, one big bonus payslip can look scarier, or different, from your final position for the year. Ask yourself before a bonus is paid:
- Which tax year does it fall in?
- What’s my total income for the year, including interest, dividends and benefits?
- Do I have pension contributions or Gift Aid that affect ANI?
- Do the childcare rules apply to my family?
The £100k childcare cliff edge
For parents, £100,000 matters for another big reason, and this one works very differently.
- Tax-Free Childcare: the government adds £2 for every £8 you pay in, up to £2,000 per child a year (£4,000 for a disabled child). GOV.UK says you can’t claim if you or your partner expect ANI over £100,000 for the tax year.
- Free Childcare for Working Parents (England): up to 30 hours a week for 38 weeks a year for eligible children aged 9 months to 4. The same £100,000 expected-ANI limit applies.
Unlike the Personal Allowance, this isn’t a gradual taper. Expect adjusted net income above £100,000 and you no longer meet the working-parent eligibility rule. Existing funded places can have a grace period, and England’s universal 15 hours for 3- and 4-year-olds is separate. That’s why people call it a “cliff edge”. How much it’s worth depends on your children’s ages and the childcare you use, so there’s no single figure for everyone. Scotland, Wales and Northern Ireland have their own childcare schemes, so check the rules where you live.
Example: a parent with a £10,000 bonus
Here’s an illustration of how the rules can stack up. A parent earning £95,000 gets £2,000 a year of Tax-Free Childcare. They receive a £10,000 bonus, taking ANI to £105,000.
- Income Tax on the bonus: £5,000 (40% on the whole bonus, plus 40% on £2,500 of lost allowance)
- National Insurance at 2%: £200
- Illustrative full-year Tax-Free Childcare support foregone: £2,000 (actual timing and loss vary)
Assuming a full £2,000 of future annual Tax-Free Childcare support would otherwise be used and is lost, they retain a net benefit of about £2,800 from the £10,000, an effective rate of around 72%. That’s a worked example, not a prediction for your family, but it shows why it’s worth checking before a pay rise or bonus.
Child Benefit is a different threshold
Don’t mix this up with the High Income Child Benefit Charge. That starts at £60,000 ANI: you pay back 1% of your Child Benefit for every £200 over, and all of it at £80,000. It uses ANI too, but it’s a separate rule.
Pensions and the £100k tax trap
You’ll often read “just put it in your pension”. There’s a real rule behind that: certain pension contributions reduce your ANI, and a lower ANI means less Personal Allowance lost. But it isn’t right for everyone, and I’m not recommending any amount. Here’s how it works.
How contributions count
- Relief at source: you pay £800 and your provider adds £200 of basic-rate tax relief. The gross £1,000 is what counts for ANI, not the £800 that left your bank.
- Net pay: your employer takes the contribution before tax, so your taxable pay is already lower.
- Salary sacrifice: you give up some salary in return for an employer pension contribution. It works differently again.
Don’t use an example for one method as though it applies to another.
Worked example: £110,000
If your ANI is £110,000, you lose £5,000 of allowance. If a qualifying £10,000 gross pension contribution counts for ANI, it becomes £100,000 and the taper no longer applies. That shows why the rule matters. It’s not a suggestion to pay £10,000 into a pension.
Pension limits to know (2026/27)
- Annual allowance: £60,000 standard. It isn’t a target, and it includes employer contributions.
- Tapered annual allowance: can reduce your allowance if your “adjusted income” is over £260,000 (and “threshold income” over £200,000), down to a minimum of £10,000. This is a different calculation from ANI.
- Money Purchase Annual Allowance: £10,000, which can apply once you’ve flexibly accessed a pension.
Tax isn’t the only thing to think about
Pension money is usually locked away until later life, and investments can go down as well as up. Affordability, emergency savings, debts and your plans all matter. For a decision about your own pension, a regulated financial adviser can help.
What about Scotland?
The Personal Allowance taper still applies in Scotland, but Scottish Income Tax rates and bands are different. So the “40% plus lost allowance equals 60%” maths doesn’t copy across exactly. Use the Scottish rates for your income.
Your £100k checklist
- Work out your adjusted net income for the whole tax year.
- Model the taper with the 60% Tax Trap Calculator.
- If you have children, check Tax-Free Childcare and funded hours on GOV.UK.
- Check Child Benefit separately (from £60,000).
- Check pension rules and limits before changing contributions.
- Re-check if your income or family changes during the year.
Common £100k tax trap mistakes
- Thinking 60% is an official tax band. It’s an effective rate.
- Using salary instead of adjusted net income.
- Thinking you lose your whole allowance at £100,001.
- Thinking all your income, or all your bonus, is taxed at 60%.
- Assuming childcare tapers like the Personal Allowance. It doesn’t.
- Confusing the £60,000 Child Benefit charge with the £100,000 rules.
- Using the net amount of a pension contribution instead of the gross.
- Applying the England maths in Scotland.
- Making a long-term pension decision just to save one year’s tax.
£100k tax trap: FAQs
Is there a 60% tax band in the UK?
No. 60% is the effective Income Tax rate between £100,000 and £125,140, caused by losing your Personal Allowance.
When does the Personal Allowance start to go?
When your adjusted net income is over £100,000. It’s fully gone at £125,140 in 2026/27.
Does my bonus count towards £100k?
Yes. A taxable bonus is part of your income for the year.
Will my whole bonus be taxed at 60%?
Not necessarily. Only the part that falls inside the taper is hit at 60%.
Do I lose Tax-Free Childcare at £100k?
You can’t claim if you or your partner expect adjusted net income over £100,000 for the tax year.
Can pension contributions reduce adjusted net income?
Certain contributions can, depending on how they’re made. Whether it’s right for you is a personal decision.
Is the pension taper the same as the £100k trap?
No. The pension tapered annual allowance uses different limits (£200,000 and £260,000) and different definitions of income.
£100k tax trap: summary
- Between £100,000 and £125,140, the effective Income Tax rate is 60%.
- It’s based on adjusted net income, not just salary.
- A bonus can push you into the trap; check your whole year’s income.
- Tax-Free Childcare and working-parent funded-hours eligibility have a £100,000 cliff edge; universal hours and grace periods are separate.
- Certain pension contributions and Gift Aid reduce ANI, but that’s a personal decision.
- Scotland’s rates are different.
Next: work out your adjusted net income, then try the 60% Tax Trap Calculator.
Official sources
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Adjusted net income
- GOV.UK: Tax-Free Childcare eligibility
- GOV.UK: Free Childcare for Working Parents eligibility
- GOV.UK: High Income Child Benefit Charge
- GOV.UK: Pension schemes rates
- GOV.UK: Tapered annual allowance
MoneySavvyUK provides general information and illustrative tools, not personal tax, pension or financial advice. Tax rules change and your circumstances matter. For advice on your situation, speak to a regulated financial adviser or a tax adviser.
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About the author: Kalpana is a UK mum, former science teacher and PhD scientist. MoneySavvyUK shares practical money ideas and general information, with sources so you can check the rules yourself.