What is the £100k tax trap in simple terms?

The £100k tax trap is an effective marginal income tax rate of 60% that applies to UK earnings between £100,000 and £125,140. It happens because the personal allowance (normally £12,570 of tax-free income) is gradually withdrawn at a rate of £1 for every £2 earned above £100,000, on top of the 40% higher-rate income tax already in force.

How does the 60% tax trap work?

For every £2 earned above £100,000, £1 of the personal allowance is withdrawn. A £10,000 pay rise from £100,000 to £110,000 generates £4,000 of income tax at 40% on the new income, plus £2,000 of income tax at 40% on the £5,000 of personal allowance now lost. Total tax on the £10,000 raise: £6,000, leaving £4,000 of net take-home - an effective rate of 60%.

At what income does the 60% tax trap start?

The 60% effective marginal rate starts at adjusted net income of £100,001. From this point, the personal allowance begins to taper, reducing by £1 for every £2 of income above the threshold.

At what income does the 60% tax trap end?

The 60% effective marginal rate ends at adjusted net income of £125,140, at which point the personal allowance has been fully withdrawn (£12,570 × 2 = £25,140 above £100,000). Above £125,140, the marginal rate drops to 45% - the standard additional-rate income tax.

How can pension contributions reduce the £100k tax trap?

Pension contributions made via relief-at-source or salary sacrifice reduce adjusted net income, the figure used to calculate the personal-allowance taper. A pension contribution that brings adjusted net income back to £100,000 restores the full personal allowance and obtains the 60% effective tax relief on the contribution itself.

Is the 60% tax trap the same as the 60% tax bracket?

No. The 60% figure is an effective marginal tax rate, not an official tax bracket. The headline UK income tax bracket above £100,000 is 40% (higher rate). The 60% figure is the combined effect of higher-rate tax plus the gradual loss of the personal allowance. No tax form or payslip will show "60% tax" as a line item, but the maths is the same as if there were a formal 60% bracket between £100,000 and £125,140.

When was the £100k tax trap introduced?

The personal allowance taper was introduced in 2010 by the Finance Act 2009, with effect from the 2010/11 tax year. At introduction, around 588,000 UK taxpayers earned above £100,000. The threshold has not been increased since, so wage inflation has substantially expanded the affected population: by 2026/27, approximately 2.06 million UK taxpayers will earn above £100,000.

Does the £100k tax trap affect parents differently?

Yes, and the effect is often larger than the tax itself. Parents of pre-school children also lose Tax-Free Childcare (up to £2,000 government top-up per child per year) and 30 hours free childcare in England at the same £100,000 threshold. For a parent of two pre-school children, the combined value lost at this cliff edge can reach approximately £20,000.

The £100k Tax Trap: How the 60% Marginal Rate Works in 2026/27

Lauren O'Loughlin

18 August 2026

The £100k tax trap - also called the 60% tax trap - is the effective 60% marginal income tax rate on UK earnings between £100,000 and £125,140 in 2026/27. Put plainly: in this band you lose about 60p of every extra £1 you earn to tax, a higher rate than people earning well above you might pay.

It happens because your £12,570 tax-free personal allowance is withdrawn as you earn above £100,000 - £1 of allowance for every £2 of income - on top of the 40% higher-rate tax already applying to this band. Once income reaches £125,140 the allowance is gone entirely, and the marginal rate drops back to 45%.

For senior professionals crossing £100,000 for the first time, the trap can go unnoticed until the first post-pay-rise payslip lands and the maths doesn't add up. For parents, a second and often larger issue hits at exactly the same income level: crossing £100,000 of adjusted net income means you lose both Tax-Free Childcare and the 30 hours of free childcare, which for a parent of two pre-school children can cost more than the extra tax itself. This article focuses on the tax mechanic, who it affects, and the planning approaches those affected can take.

What is the £100k tax trap?

The £100k tax trap is not a formal tax band, no HMRC table or payslip lists a "60% rate". It is the effect of gradually removing the personal allowance from higher earners: as the tax-free slice of income disappears, money that was previously shielded becomes taxable, and the marginal cost of each extra pound earned in the band rises to an effective 60%.

You will see the same thing called both the "£100k tax trap" and the "60% tax trap". We use both here, because UK readers searching for help with this issue use both.

The mechanism is not new - the personal-allowance withdrawal was introduced in 2010 - but it has grown into a much bigger problem as wages have risen against frozen thresholds. Income tax thresholds have been held since 2021/22, and the £100,000 trigger has never been raised since the taper began. According to a Freedom of Information request to HMRC by wealth manager Rathbones, reported by MoneyWeek in January 2026, approximately 2.06 million UK taxpayers will earn over £100,000 in the 2026/27 tax year, around 6% of the workforce, and 5.7% more than in 2025/26. The personal allowance figures referred to throughout this guide are set out in GOV.UK's income tax rates and allowances guidance.

How the 60% effective tax rate works

For every £2 of income above £100,000, £1 of personal allowance is withdrawn, and because that happens on top of the 40% higher-rate tax already applying to the band, the two combine into a 60% effective marginal rate.

The clearest way to see it is a £10,000 pay rise from £100,000 to £110,000:

The £10,000 is taxed at 40% as higher-rate income: an income tax bill of £4,000.
At the same time, £5,000 of personal allowance is lost - £1 for every £2 of the increase above £100,000.
That £5,000 of previously-tax-free income now becomes taxable at 40%: a further £2,000.

Total income tax on the £10,000 raise: £6,000. Net take-home increase: £4,000. Effective marginal rate: 60%.

Income band (2026/27)	Marginal income tax rate
£0 – £12,570	0% (personal allowance)
£12,571 – £50,270	20% (basic rate)
£50,271 – £100,000	40% (higher rate)
£100,001 – £125,140	60% (effective, due to personal allowance taper)
£125,141+	45% (additional rate)

Rates apply to England, Wales, and Northern Ireland. Scotland has different income tax rates and bands.

This is income tax only. Employee National Insurance at 2% on this band of earnings adds a further 2%, making the true combined marginal rate 62% for earners in this range, and higher still once student loan repayments are factored in for many readers. The 60% figure is the headline most commentary uses; the 62% figure is what actually leaves your bank account.

Who the £100k tax trap affects in 2026/27

We see the trap catch people most often at four specific career moments:

Senior partners in professional services firms meet it for the first time on entry to the partnership, when their gross pay structure changes and total income crosses £100,000.
Senior bankers typically encounter it on bonus crossings rather than base salary, a base of £90,000 plus a £30,000 bonus puts the full bonus in the 60% band.
Senior tech professionals are increasingly caught by RSU vest events, particularly in years when equity from earlier grants vests on top of cash compensation already at higher-rate level.
Recently-promoted MDs at investment banks, consultancies, and large corporates often cross the threshold mid-year, finding their first quarterly bonus after promotion smaller than expected.

For parents in any of these positions, the same £100,000 threshold also removes both Tax-Free Childcare and 30 hours free childcare. For a parent of two pre-school children, the value lost can reach approximately £20,000 - materially more than the additional income tax across the 60% band itself.

Planning approaches NOVA's advisers discuss

A reduced personal allowance doesn't have to be permanent. The personal-allowance taper looks at adjusted net income - your total taxable income, minus certain deductions, which in this context can include pension contributions and Gift Aid charitable donations.

Pension contributions to reduce adjusted net income

Pension contributions made via relief-at-source or salary sacrifice reduce the adjusted net income figure used for the taper. Someone with £110,000 of taxable income who makes a £10,000 gross pension contribution brings their adjusted net income back to £100,000, restoring the full £12,570 personal allowance and obtaining 60% effective tax relief on the contribution itself. For parents, the same contribution also restores eligibility for Tax-Free Childcare and 30 hours free childcare, making the move materially more valuable than the tax saving alone suggests.

The contribution isn't lost, it sits in the pension and grows tax-free until retirement. The trade-off is between current cash flow and longer-term accumulation, and the right answer depends on circumstances.

Salary sacrifice arrangements

Salary sacrifice converts part of gross salary into an employer pension contribution. The effect on adjusted net income is the same as a personal pension contribution, with an additional benefit: no National Insurance is payable on the sacrificed amount - neither the employee 2% NI on this band nor the employer's 15% NI contribution. For many readers in this band, that NI saving can make salary sacrifice the more efficient route where it's available.

One scheduled change to factor into longer-term planning: at Autumn Budget 2025 (26 November 2025), the Chancellor confirmed that from 6 April 2029, only the first £2,000 of salary-sacrificed pension contributions per individual per tax year will remain exempt from Class 1 National Insurance Contributions. Above the £2,000 cap, both employer and employee Class 1 NIC will apply to the excess. The income tax treatment of salary sacrifice pension contributions is unchanged, contributions remain free from income tax within the annual allowance - only the NIC treatment changes. The figures and approaches in this article reflect the rules in force for the 2026/27 tax year; planning for years from 2029/30 onwards will need to factor in the £2,000 NIC cap.

Gift Aid charitable donations

Charitable donations made under Gift Aid also reduce adjusted net income for the taper. A higher-rate or additional-rate taxpayer can reclaim the difference between their marginal rate and the 20% basic rate via Self Assessment, and the gross value of the donation is deducted from adjusted net income. For someone whose income is just over £100,000 - say £103,000 - a £3,000 net Gift Aid donation (£3,750 gross) brings adjusted net income back to £100,000. The donation is a real charitable gift, so this only makes sense where the donor would want to give regardless; but for clients who already give, timing and sizing donations against the £100,000 threshold can be a useful planning tool.

Bonus timing and deferral

Where a reader has discretion over when a bonus is received - typically senior partners with profit-share structures, MDs with deferred compensation, or senior tech professionals with discretion over equity grants - timing can move them in or out of the trap in a given tax year. The timing of variable remuneration may affect adjusted net income calculations in certain circumstances. For RSUs specifically, the tax treatment of RSU vests makes timing decisions more complex than for cash bonuses, since vest timing is largely fixed by the original grant.

The interaction with the tapered annual allowance for income above £200,000

For very high earners, the £100k trap is the first trap, not the only one. Income above £200,000 also faces the tapered annual allowance for pension contributions, which reduces the maximum that can be contributed to a pension each year. The two interact directly: the pension contribution used to mitigate the £100k trap is itself constrained by the tapered annual allowance once adjusted income reaches £260,000. At those income levels, carry forward of unused pension allowance from previous tax years becomes important to keep planning options open.

When the £100k tax trap is and isn't worth planning around

Not every income level makes intensive planning worthwhile. For a single person at £105,000 with no childcare needs, the trap costs around £3,000 in additional tax across the band, worth mitigating with pension contributions if you wanted to make them anyway, but marginal if pension capacity is already exhausted elsewhere.

For a parent of two pre-school children at £101,000, the same planning move can restore approximately £20,000 of childcare value. The maths is entirely different.

In our experience, people most often discover the trap mid-tax-year; usually when a first post-pay-rise bonus payslip lands. By then the year's options are narrower, and salary sacrifice arrangements typically require advance opt-in through the employer scheme. The clients who manage the trap most efficiently are those who anticipate it before it arrives.

How NOVA helps with the £100k tax trap

We work regularly with senior professionals navigating the £100k trap for the first time - typically partners just promoted, MDs after a bonus, or senior tech professionals after an RSU vest year. A common pattern we see: a client who knows the trap affects them, has been paying additional tax for a year or two, but hasn't sat down and modelled the full picture; the interaction between the income tax band, the childcare cliff edge if relevant, the tapered annual allowance at higher income levels, and the right combination of pension and Gift Aid levers for their circumstances. The numbers can change materially once that modelling is done.

If you'd like to speak to a NOVA adviser about navigating the £100k trap, we offer a free 20-minute introductory call. There's no obligation and no charge.

How this article was prepared

This article was written by Lauren O'Loughlin, Financial Adviser and Partner at NOVA Wealth. This article cites GOV.UK income tax and personal allowance guidance directly, with primary sources linked inline at the point of claim. Taxpayer population figures are based on HMRC data obtained by wealth manager Rathbones via Freedom of Information request and reported by MoneyWeek in January 2026.

Capital at risk. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change. We do not provide tax advice. This article does not constitute personal advice. All figures quoted are for illustration purposes only. If you are unsure of your options you should seek professional financial advice or visit Pensionwise.gov.uk.

Issued on behalf of Nova. Nova is a trading name of Nova Wealth Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN: 778951) and is a limited company registered in England & Wales (10739796).

About the author

Lauren O'Loughlin, Financial Adviser. Lauren is a Partner at NOVA Wealth, based in London. She works primarily with busy professionals on retirement and pension planning, investment strategy, tax-efficient saving, and personal tax planning - helping clients understand how their income and allowances interact, and where a decision is worth making before the tax year ends. Connect with Lauren on LinkedIn.

Useful sources

GOV.UK - Income Tax rates and personal allowances
GOV.UK - Personal Allowances: adjusted net income
MoneyWeek (January 2026) - Two million taxpayers to be hit by £100k tax trap by 2026/27, reporting Rathbones / HMRC FOI figures