By Tax Calculator UK · Published · 6 min read
What the trap actually is
Most people get a tax-free Personal Allowance of £12,570. Once your adjusted net income goes above £100,000, that allowance is reduced by £1 for every £2 you earn over the limit. By £125,140 it has gone completely.
No separate 60% band appears on any HMRC table. The effect comes from two things happening at once: each extra £1 is taxed at the 40% higher rate, and every £2 also removes £1 of allowance, which pulls another 50p into tax at 40%.
Worked example: a £10,000 pay rise from £100,000
Take an employee in England earning £100,000 who gets a £10,000 rise to £110,000. The rise itself is taxed at 40%, which is £4,000. Their Personal Allowance also falls by £5,000, and that £5,000 is now taxed at 40%, adding another £2,000.
So £6,000 of the £10,000 goes in Income Tax. Add employee National Insurance at 2% on earnings above the upper earnings limit and the total deduction is about £6,200, leaving roughly £3,800 of the rise.
| Item | Amount |
|---|---|
| Pay rise | £10,000 |
| 40% tax on the rise | £4,000 |
| 40% tax on £5,000 of lost allowance | £2,000 |
| Employee NI at 2% | £200 |
| Kept from the rise | About £3,800 |
Scottish taxpayers
The taper works the same way in Scotland, but the rates differ. With the 45% advanced rate applying in this range, the effective rate on income between £100,000 and £125,140 is higher than in the rest of the UK. Use the Scotland calculator to see the exact figure for your salary.
Legitimate ways people reduce the effect
The test uses adjusted net income, so anything that lowers that figure can restore some or all of the allowance. Common options include:
- Pension contributions, either through salary sacrifice or personal contributions with relief claimed through Self Assessment.
- Gift Aid donations, which extend your basic rate band and reduce adjusted net income.
- Salary sacrifice for other benefits your employer offers, such as a cycle-to-work or electric car scheme.
Watch out for childcare support too
£100,000 is also the limit for Tax-Free Childcare and the extended funded childcare hours in England. Going even £1 over can mean losing that support entirely, which for some families costs more than the tax itself. Check your eligibility on GOV.UK before relying on it.
Check your own numbers
Everyone's position is different, especially with bonuses, benefits in kind or income from savings and dividends. Put your figures into the salary or pension calculator to see how a contribution changes your take-home pay. For complex cases, speak to a qualified adviser.
Compare cash and pension outcomes separately
A pension scenario changes where the money goes as well as the estimated tax. Compare the cash available now and the amount committed to retirement before judging the option solely by tax saved.
Frequently asked questions
Is there really a 60% tax band in the UK?
No official band is set at 60%. It is an effective rate caused by the Personal Allowance being withdrawn between £100,000 and £125,140 while that income is also taxed at 40%.
Check it on GOV.UK: Income Tax rates and allowances (opens GOV.UK in a new tab)
What income counts towards the £100,000 limit?
HMRC uses adjusted net income: your total taxable income minus certain reliefs, such as grossed-up Gift Aid donations and pension contributions that received tax relief.
Check it on GOV.UK: Tax on your private pension (opens GOV.UK in a new tab) · Income Tax rates and allowances (opens GOV.UK in a new tab)
Can pension contributions get my allowance back?
Yes. Contributions that reduce adjusted net income can restore the allowance. Salary sacrifice does this directly; relief-at-source contributions are grossed up and deducted when you file Self Assessment.
Check it on GOV.UK: Tax on your private pension (opens GOV.UK in a new tab)