Earn between £100,000 and £125,140 and every extra pound you earn costs you 60p in income tax, plus 2p National Insurance. It's one of the highest marginal tax rates in the UK, and more people are caught by it every year because the £100,000 threshold hasn't changed since 2010.
Why it happens
Your £12,570 tax-free Personal Allowance is reduced by £1 for every £2 of adjusted net income above £100,000. So earning an extra £2 costs you 80p in higher-rate tax on the £2 itself, plus 40p tax on the £1 of allowance you've lost: £1.20 on £2, or 60%.
What it costs
By the time your income reaches £125,140, you've lost the whole allowance, which costs £5,028 in extra tax (£12,570 × 40%).
| Income | Personal Allowance | Income tax |
|---|---|---|
| £100,000 | £12,570 | £27,432 |
| £110,000 | £7,570 | £33,432 |
| £120,000 | £2,570 | £39,432 |
| £125,140 | £0 | £42,516 |
How to get out of the trap
- Pension contributions: contributions reduce your adjusted net income. A salary sacrifice contribution of £10,000 on a £110,000 salary brings you back to £100,000, restores your full allowance, and costs you only about £3,800 in take-home pay.
- Gift Aid donations: these also reduce adjusted net income.
- Childcare: crossing £100,000 also removes eligibility for Tax-Free Childcare and the 30 hours of funded childcare in England, so bringing income below £100,000 can be worth thousands more for parents.
Model your own figures with the take-home pay calculator, which flags the trap automatically, and plan your retirement savings with the pension calculator.
Last reviewed October 2026.