60% tax trap UK: the £100k Personal Allowance taper

The 60% tax trap is the stretch of income between £100,000 and £125,140 where, outside Scotland, each extra £1 costs 60p in Income Tax^[1]. Above £100,000 of adjusted net income the Personal Allowance falls by £1 for every £2, so each pound is taxed at 40% and drags 50p of allowance into tax at 40%^[1].

The Income Tax rate table on GOV.UK has no 60% band. The figure is what two published rules produce together and both run on one number: adjusted net income, which is neither salary nor take-home pay. The same number decides Tax-Free Childcare and the 30 hours of free childcare in England, where £100,000 is a hard cut-off rather than a slope.

How does the Personal Allowance taper work over £100,000?

The standard Personal Allowance is £12,570^[1]. Once adjusted net income passes £100,000 the allowance goes down by £1 for every £2 above that line^[1] and it is zero from £125,140^[1], which is £100,000 plus twice the £12,570 allowance.

The withdrawal starts with the first pound. At £100,001 of adjusted net income the allowance is already 50p lower. At £110,000 it is £5,000 lower, leaving £7,570. At £125,140 nothing is left.

The test runs on the tax year as a whole, not on any one payslip. A salary below £100,000 can cross the line with a bonus, a taxable benefit or rental profit on top, in a year when no single month looked unusual. If the tax code still carries the full allowance, payroll deducts as though nothing had changed and the difference surfaces when HMRC reconciles the year. What your tax code means shows how a reduced allowance appears in the code. Why take-home pay drops in a bonus month walks through how PAYE treats the month itself.

Why is the rate 60% between £100,000 and £125,140?

Two rules combine. In England, Wales and Northern Ireland, income in this range is taxed at the higher rate of 40%, which runs from £50,271 to £125,140^[1]. On top of that, the allowance shrinks by £1 for every £2 of adjusted net income above £100,000.

Follow one extra £1. It is taxed at 40%, which is 40p. It also removes 50p of allowance, so 50p of income that was tax-free becomes taxable at 40% too, which is 20p. That makes 60p of Income Tax on £1: a 60% marginal rate. Across the whole band, losing the full £12,570 allowance adds £5,028 of Income Tax (£12,570 at 40%) on top of the 40% charged on the income itself.

Past £125,140 there is no allowance left to lose and income is taxed at the additional rate of 45%^[1]. The marginal rate climbs from 40% to 60%, then falls back to 45%.

A payslip shows more than 60%. Most employees have National Insurance category letter A^[2]. Employee National Insurance at category A carries on at 2% on earnings over £4,189 a month^[2], so for those employees each £1 in the band costs 62p in Income Tax and National Insurance together.

Scotland sets its own rates on earnings. Income in this range falls in the Scottish advanced rate of 45%^[3], so the same taper produces 67.5% there: 45p on the £1 plus 45% of the 50p withdrawn.

How do you calculate adjusted net income?

HMRC defines adjusted net income as total taxable income before any Personal Allowances, less certain tax reliefs^[4]. Start with everything taxable: salary and bonus, money earned from employment including any benefits from the job^[4], self-employed profit, rental profit, savings interest and dividends. Then take off:

• pension contributions paid gross, before tax relief^[4]
• pension contributions where the provider has already added basic-rate relief, at the grossed-up amount of £1.25 for every £1 paid in^[4]
• Gift Aid donations, also grossed up at £1.25 for every £1 given^[4]
• trading losses^[4]

It is not salary nor take-home pay. HMRC’s Tax-Free Childcare manual notes that it is not the same as gross income, net income or income from earnings^[5]. Two synthetic cases show the gap. A £98,000 salary with £5,000 of rental profit is £103,000 of adjusted net income, over the line though the salary is not. A £104,000 salary with £3,200 paid into a personal pension under relief at source comes to exactly £100,000, because the £3,200 grosses up to £4,000.

Salary sacrifice works a step earlier. The pay is given up before it is paid, so it never becomes taxable income and there is nothing to take off afterwards; salary sacrifice explained covers how the arrangement is set up. Contributions to a workplace scheme taken from pay before tax are already out of the taxable pay figure too, so they are not taken off a second time.

What does the trap cost on a £110,000 salary?

Take an employee in England on a £110,000 salary in 2026/27, with no other income, no pension contributions and no Gift Aid, so adjusted net income is £110,000. Basic rate is 20% on taxable income from £12,571 to £50,270^[1], which is the first £37,700 of taxable income (£50,270 less the £12,570 allowance). That band keeps its width when the allowance shrinks. Everything above it here is taxed at 40%. Figures are illustrative.

2026/27, England	Salary £100,000	Salary £110,000
Adjusted net income	£100,000	£110,000
Personal Allowance	£12,570	£7,570
Taxable income	£87,430	£102,430
Income Tax	£27,432	£33,432

The extra £10,000 of salary adds £15,000 to taxable income: the £10,000 itself plus £5,000 of withdrawn allowance. All of it sits in the 40% band, so Income Tax rises by £6,000, which is 60% of the £10,000. Employee National Insurance at 2% takes another £200, leaving £3,800 of the £10,000 in take-home pay.

Does salary sacrifice keep the Personal Allowance?

It can, because it lowers adjusted net income before the taper is worked out. Here the same synthetic employee gives up £10,000 of the £110,000 salary under a salary sacrifice arrangement and the employer pays it into the pension scheme.

2026/27, England	No sacrifice	£10,000 sacrificed
Cash salary	£110,000	£100,000
Into the pension by sacrifice	£0	£10,000
Adjusted net income	£110,000	£100,000
Personal Allowance	£7,570	£12,570
Income Tax	£33,432	£27,432
Employee National Insurance on the £10,000	£200	£0

Adjusted net income is back at £100,000 and the full allowance returns. £10,000 reaches the pension and take-home pay falls by £3,800: the £10,000 less the £6,000 of Income Tax and £200 of employee National Insurance no longer charged on it.

A personal pension reaches the same adjusted net income by another route. Under relief at source, £8,000 paid in grosses up to £10,000 at £1.25 for every £1 and the grossed-up £10,000 comes off. The allowance comes back the same way. What differs is National Insurance, which a sacrifice reduces and a personal contribution does not. Whether either route fits a given situation turns on things this example leaves out, such as when the money is needed, the scheme’s rules and pension contribution limits. The National Insurance side of salary sacrifice is also changing, which salary sacrifice explained covers.

How does the £100,000 test work for Tax-Free Childcare and the 30 hours?

The same adjusted net income figure decides two childcare schemes and neither tapers. Tax-Free Childcare cannot be claimed if you or your partner expects adjusted net income over £100,000 for the current tax year^[6]. Free Childcare for Working Parents in England gives 30 hours of free childcare a week for 38 weeks of the year for children aged 9 months to 4 years^[7] and applies the same test^[7].

Tax-Free Childcare tops up £2 for every £8 paid into the childcare account^[8], up to £500 every 3 months for each child, or £2,000 a year^[8]. Adjusted net income of £100,001 removes the whole top-up, not 50p of it and the 30 hours go with it.

Three details matter close to the line:

• It is adjusted net income, not pay. HMRC’s manual says a person must not expect adjusted net income to exceed £100,000 in the tax year of the declaration^[5], so the pension and Gift Aid deductions above move this figure too.
• It looks forward and is rechecked. Parents confirm their details every 3 months^[8], so a bonus or a pay rise during the year comes into the next confirmation.
• It is tested per parent, not per household. Two parents on £99,000 each can pass the income test. One parent on £101,000 with a partner on £30,000 cannot.

How do people normally work this out?

The usual starting point is salary. A take-home pay calculator works forward from a salary figure, which is right only when salary is the whole of adjusted net income. Rental profit, interest, dividends and taxable benefits push the real figure up while Gift Aid and pension contributions outside payroll pull it down. None of them sits in a salary box. A calculator that does not model the taper shows 40% where the marginal rate is 60%.

Asking payroll gets the PAYE view. Payroll applies the tax code HMRC has issued and sees only the pay it runs, so it can explain what was deducted but not where adjusted net income will land for the year.

Others look in the HMRC app or at HMRC’s Check your Income Tax service, which shows the Personal Allowance and tax code, the tax paid so far this year and how much is likely to be paid for the rest of it^[1]. That is HMRC’s estimate, built from what HMRC has been told, so a bonus or a pension change it has not yet seen is not in it.

On forums the conversation goes straight to the fix: a pension contribution or salary sacrifice to get under £100,000. What that skips is the figure underneath: which income has to come in under £100,000 and whether a childcare claim depends on it too.

How you’d do this in Surplus

In Surplus, the Tax Helper starts from the payslip. The payslip analyser takes the gross pay, tax code, taxable benefits and pension contribution the payslip reports and estimates adjusted net income from them. It also accounts for whether the pension runs through salary sacrifice, a net pay arrangement or relief at source. PAYE is modelled with the taper applied, so pay between £100,000 and £125,140 is treated as allowance being withdrawn rather than as an unexplained deduction. When the estimate sits inside the taper or close below £100,000, Surplus can raise it as a priority. Read-only Open Banking provided by Yapily means the take-home it checks against is the amount that actually landed. The estimate is payroll-only: income from elsewhere, Gift Aid and pension payments made outside payroll are not on a payslip, so they are not in it.

Every figure above is cited to its source where it appears and re-verified against that source whenever UK rates move.