The £100k Personal Allowance taper, and the 60% trap
There's a band of income where every extra pound you earn is taxed at an effective 60%. It isn't a headline rate you'll find in any table. It's the side effect of losing your Personal Allowance. If your income is anywhere near £100,000, this is the single most important thing to understand about your tax.
How the taper works
Everyone starts with a Personal Allowance of £12,570 that's tax-free. Once your adjusted net income goes over £100,000, HMRC takes £1 of allowance away for every £2 above that line. By £125,140, the whole £12,570 allowance is gone.
| Income | Personal Allowance left |
|---|---|
| £100,000 | £12,570 |
| £110,000 | £7,570 |
| £120,000 | £2,570 |
| £125,140+ | £0 |
Why it means 60%
Take £100 of income earned inside the taper zone. You pay 40% higher-rate tax on it, so £40 goes straight away. But that £100 also strips away £50 of your Personal Allowance, and that £50 now gets taxed at 40% too, another £20. So £60 of your £100 disappears in tax. That's a 60% effective rate on every pound between £100,000 and £125,140, higher than the 45% additional rate that kicks in above it.
"Adjusted net income" is the number that matters
The taper is based on adjusted net income, not your headline salary or profit. That's your total taxable income minus a few things, most usefully gross pension contributions and Gift Aid donations. This is the lever you can pull.
How to soften the taper
The most effective move is a pension contribution. Because pension payments reduce your adjusted net income, they can pull you back below £100,000 and hand back the allowance you were losing. In the taper zone, a pension contribution can effectively get you 60% relief: £100 into your pension can cost you as little as £40 in take-home terms.
A quick example: someone with £110,000 of income who pays £10,000 (gross) into a pension brings their adjusted net income back to £100,000. They recover the full £12,570 allowance and get higher-rate relief on the contribution. The combined effect is why financial advisers talk about the £100k to £125k band as the best place in the tax system to make a pension contribution.
Gift Aid donations work the same way for the taper, reducing adjusted net income. And if you're self-employed, making sure you've claimed every legitimate allowable expense lowers your profit, which lowers your income for the taper too.
See it in your own figures
Our estimator models the taper directly. Enter an income above £100,000 and you'll see the "Reduced Personal Allowance" line, exactly as it appears on a real SA302. Then add a pension contribution and watch the allowance, and the tax, move. It's the clearest way to see how much a contribution is really worth to you before you make it.
The taper applies UK-wide and hasn't moved with inflation, so as wages rise more people drift into it each year. If you're close to the line, it pays to run the numbers before the tax year ends, while you can still act on them.