How the trap works
Everyone under £100,000 gets a £12,570 tax-free Personal Allowance. Above £100,000 of "adjusted net income", the allowance shrinks by £1 for every £2 of extra income, until it disappears at £125,140.
So £2 of extra income costs 40% × £2 in tax, plus 40% on the £1 of allowance you lose: £1.20 in total, a 60% Income Tax rate. Add 2% National Insurance and you keep only 38p of each extra pound.
The numbers from £95,000 to £130,000
| Salary | Personal Allowance | Income Tax | Take-home pay | Marginal rate |
|---|---|---|---|---|
| £95,000 | £12,570 | £25,432 | £65,657 | 42% |
| £100,000 | £12,570 | £27,432 | £68,557 | 62% |
| £105,000 | £10,070 | £30,432 | £70,457 | 62% |
| £110,000 | £7,570 | £33,432 | £72,357 | 62% |
| £115,000 | £5,070 | £36,432 | £74,257 | 62% |
| £120,000 | £2,570 | £39,432 | £76,157 | 62% |
| £125,140 | £0 | £42,516 | £78,111 | 47% |
| £130,000 | £0 | £44,703 | £80,686 | 47% |
The childcare cliff edge
Parents face a second problem: once adjusted net income passes £100,000, you lose Tax-Free Childcare and the extra funded childcare hours for your children. For a family with young children, that can be worth thousands of pounds a year on top of the 62% rate.
How to escape it: pension contributions
Pension contributions reduce your adjusted net income. Paying the part of your salary above £100,000 into a pension restores your full Personal Allowance.
Example: on £110,000, contributing £10,000 to a workplace pension reduces your take-home pay by only £4,000 a year, while £10,000 goes into your pension. The government effectively adds £6,000.
What counts as adjusted net income
Adjusted net income is your total taxable income (salary, bonuses, benefits in kind, rental profits, interest and dividends) minus certain reliefs: pension contributions made under relief at source (grossed up), Gift Aid donations (grossed up) and trading losses. Salary sacrifice and net pay pension contributions already reduce the salary figure.
Example: a £10,000 bonus on £98,000
On £98,000 you take home £67,397. A £10,000 bonus takes you to £108,000 and £71,597 of take-home pay: you keep only £4,200 of the bonus.
Sacrificing the part of the bonus above £100,000 into your pension would keep your full Personal Allowance.
Frequently asked questions
What is the 60% tax trap?
The effective 60% Income Tax rate on income between £100,000 and £125,140, caused by the withdrawal of the Personal Allowance. With National Insurance, it is 62%.
At what salary do you lose the Personal Allowance?
It starts falling at £100,000 and is gone at £125,140.
Does salary sacrifice help?
Yes. Salary sacrifice pension contributions reduce adjusted net income and National Insurance too.
Does a bonus count towards the £100k limit?
Yes. Bonuses, benefits in kind and investment income all count towards adjusted net income.
Figures use HMRC 2026/27 Income Tax bands (including Scottish rates), Class 1 National Insurance and student loan thresholds for an employee paid through PAYE. Read our methodology. Last updated September 25, 2026. Estimates for information only, not tax advice.