TL;DR: The "100k tax trap" is the very high marginal tax rate UK earners face on income between 100,000 pounds and 125,140 pounds. For each 2 pounds of "adjusted net income" above 100,000 pounds, the personal allowance is reduced by 1 pound, so the personal allowance disappears entirely once adjusted net income reaches 125,140 pounds. Combined with the 40 percent higher rate of income tax, this creates an effective marginal tax rate of 60 percent on income in that band (62 percent including employee NI for earners below State Pension age). For parents of children under 12 the loss of the entitlement to 30 free hours of childcare and tax-free childcare adds to the trap. The most common ways to escape are pension contributions, salary sacrifice, gift aid, and timing of bonuses.
Last reviewed May 2026
The "100k tax trap" is one of the most discussed quirks of the UK income tax system. It is not a tax rate in its own right; it is the consequence of stacking the standard 40 percent higher rate of income tax on top of the gradual withdrawal of the personal allowance for higher earners. The result is a marginal effective rate of 60 percent (or higher with NI) on a narrow band of income that has been unchanged in cash terms since 2010, even as wages have risen.
This guide explains exactly how the trap arises, who it affects, what counts as "adjusted net income" for the test, the additional consequences for parents of young children, and the strategies available to legally reduce taxable income within the band.
How the trap arises
The personal allowance is the chunk of income that is taxed at 0 percent. For 2025-26 the standard personal allowance is 12,570 pounds. Under section 35 of the Income Tax Act 2007, the personal allowance is reduced by 1 pound for every 2 pounds of adjusted net income above 100,000 pounds. The taper continues until the personal allowance reaches zero at adjusted net income of 125,140 pounds.
Within the 25,140 pound band from 100,000 to 125,140 pounds, every additional 1 pound of income causes two things: it is taxed at the 40 percent higher rate, and it withdraws 50p of personal allowance, exposing 50p of previously tax-free income to the 40 percent rate. The combined effect is 40p of new tax on the pound earned plus 20p of additional tax from the withdrawn allowance, equalling 60p of tax per pound. The marginal effective rate is therefore 60 percent.
For employees below State Pension age who pay employee Class 1 NI on earnings up to the upper earnings limit, the marginal rate is higher at the start of the band before falling once earnings cross the upper earnings limit. For self-employed earners the Class 4 NI position is similar. Adding the NI piece typically takes the effective marginal rate to around 62 percent for an employee in this band.
Above 125,140 pounds, the personal allowance is gone, the higher rate applies up to the additional-rate threshold, and the marginal rate reverts to 40 percent (plus NI). At 125,140 pounds the additional-rate threshold (also 125,140 pounds for 2025-26 since the threshold was reduced in the November 2022 Autumn Statement) means earnings above that figure are taxed at 45 percent.
What counts as adjusted net income
The 100,000 pound test is on adjusted net income, not gross salary. Adjusted net income is total taxable income from all sources (salary, bonus, dividend, savings interest, rental income, taxable benefits) less certain deductions, principally pension contributions (gross of basic-rate relief at source, plus any higher-rate relief reclaimed) and Gift Aid charitable donations (grossed up).
This matters for the trap because pension contributions made via relief at source reduce adjusted net income for the purpose of the taper. A salary of 110,000 pounds gross becomes adjusted net income of 100,000 pounds if the saver contributes 10,000 pounds gross to a personal pension (with the contribution given full relief in the calculation). At 100,000 pounds adjusted net income, the personal allowance is fully restored.
Salary sacrifice pension contributions reduce the gross salary itself, so they reduce adjusted net income for the taper in the same way. The two routes produce equivalent income tax outcomes for adjusted net income purposes, but salary sacrifice also saves employee NI on the sacrificed amount, making it the more efficient mechanism for an employee with the option.
Charitable donations under Gift Aid are also deductible from adjusted net income. A 1,000 pound donation under Gift Aid becomes 1,250 pounds grossed up, reducing adjusted net income by 1,250 pounds for the taper test.
The child-benefit interaction (the other 100k trap, for parents)
Until 6 April 2024, the high-income child benefit charge (HICBC) applied to anyone in the household with adjusted net income above 50,000 pounds, fully clawing back child benefit by 60,000 pounds. The November 2023 Autumn Statement raised these thresholds: from 6 April 2024, the HICBC starts at adjusted net income of 60,000 pounds and fully claws back child benefit by 80,000 pounds. The HICBC therefore now affects earners well below the 100,000 pound personal allowance taper.
The withdrawal of the 30 free hours of childcare entitlement and tax-free childcare for parents of children aged under 12 still occurs at a 100,000 pound adjusted net income threshold per parent. For a couple each earning 99,000 pounds, both retain entitlement; for a household with one earner on 105,000 pounds and one not working, the entitlement is lost.
The combined effect is that some parents of young children face an effective marginal rate well above 60 percent on the band just above 100,000 pounds, once the loss of tax-free childcare worth thousands of pounds a year and the loss of 30 free childcare hours worth thousands more is factored in. Pension contribution to bring adjusted net income below 100,000 pounds is therefore particularly valuable for affected parents.
Who is most affected
The 100,000 pound threshold has not changed since it was introduced in April 2010, while average wages have grown materially since then. The Office for Budget Responsibility has highlighted the rising number of taxpayers affected: from a small minority in 2010 to several hundred thousand higher earners now caught at least partially within the band.
Professional services workers, senior managers, doctors approaching consultant grade, mid-career lawyers, and senior public sector officials are commonly in or near the band. Bonus-driven earners can move in and out of the band year to year depending on the bonus payment, which creates the strange position where additional pre-tax earnings can result in lower net pay.
Higher-earning self-employed people and company directors can face the band on a one-off basis when a large dividend or contract payment lifts the year's income. Dividend income is included in adjusted net income (after the dividend allowance), so a director with a large dividend can be caught.
How to escape the trap legally
Pension contributions are the single most effective tool. A taxpayer with adjusted net income between 100,000 and 125,140 pounds receives roughly 60 percent effective relief on a pension contribution within the band (the 40 percent higher rate relief plus 20 percent relief from the restored personal allowance), an unusually high return. A contribution sufficient to bring adjusted net income to 100,000 pounds restores the full personal allowance and avoids the trap entirely.
Salary sacrifice is the most efficient delivery mechanism where the employer allows it. The employee's gross salary is reduced by the sacrificed amount, which goes into the pension. This avoids both the higher rate and the employee NI on the sacrificed amount. Some employers pass their employer NI saving on the sacrifice into the pension too.
Gift Aid charitable donations grossed up are deducted from adjusted net income for the taper test. A 1,000 pound donation Gift Aided reduces adjusted net income by 1,250 pounds, recovering the equivalent of 750 pounds of allowance for an earner in the band.
Bonus timing can be used by employees with some control over the timing of variable pay. A bonus that would push the year's adjusted net income from 95,000 to 115,000 pounds creates a large amount of band-trapped tax. Splitting the bonus across two tax years, where the employer allows, can keep both years out of the trap.
For couples, transferring income-producing assets to a lower-earning spouse can reduce the higher earner's adjusted net income. Dividends from a jointly-owned investment can be split to keep both partners out of the trap. Marriage allowance and the use of personal savings allowance for each spouse may also help marginally.
Examples and order-of-magnitude maths
Consider an earner with a 110,000 pound salary, no other income, no pension contributions. Their adjusted net income is 110,000 pounds. The personal allowance is reduced by (110,000 - 100,000) / 2 = 5,000 pounds, leaving 7,570 pounds of allowance. The 5,000 pounds of formerly tax-free income is now taxed at 40 percent, an additional 2,000 pounds of tax. Combined with the 40 percent on the 10,000 pounds above 100,000 (4,000 pounds), the income tax on that 10,000 pound slice is 6,000 pounds, an effective marginal rate of 60 percent.
If the same earner makes a 10,000 pound gross personal pension contribution, adjusted net income falls to 100,000 pounds, the personal allowance is fully restored, and the higher rate of 40 percent no longer applies to the 10,000 pounds redirected to the pension. The total tax saving is roughly 6,000 pounds, meaning the 10,000 pound pension contribution costs the saver around 4,000 pounds net.
For a parent of two young children losing 30 free childcare hours and tax-free childcare worth, say, an extra 5,000 pounds a year, bringing adjusted net income below 100,000 pounds via pension contribution can save closer to 11,000 pounds in combined tax and childcare benefit. The pension contribution required might be perhaps 4,000 pounds net for the parent, with the rest funded by HMRC and the restored childcare support.
How we verified this
The figures, thresholds, and mechanics described here are drawn from section 35 of the Income Tax Act 2007 (the personal allowance taper), HMRC's published income tax rates and allowances for 2025-26, the November 2023 Autumn Statement (high-income child benefit charge thresholds), and HMRC's guidance on adjusted net income, Gift Aid, pension relief, and tax-free childcare. No invented HMRC reference numbers, individual taxpayer details, or pension scheme details have been used.
Disclaimer: This article is general information about the UK personal allowance taper and the related "100k tax trap". It is not personal tax advice. Tax rules and allowances change in Budgets and Finance Acts. Anyone in the affected band considering pension contributions, salary sacrifice, or other planning should take advice from a qualified tax adviser or financial adviser, and check the current HMRC guidance before acting.
Frequently asked questions
What is the 100k tax trap?
The 100k tax trap is the band of adjusted net income between 100,000 pounds and 125,140 pounds where UK earners face an effective marginal income tax rate of 60 percent because the personal allowance is withdrawn at the rate of 1 pound for every 2 pounds of income above 100,000 pounds. Including employee NI for those below State Pension age, the effective marginal rate is around 62 percent.
How can I avoid the 100k tax trap?
The most effective approach is to make pension contributions (personal or via salary sacrifice) sufficient to bring adjusted net income below 100,000 pounds. The effective relief on contributions made within the trap band is around 60 percent (40 percent higher rate plus 20 percent restored allowance), which is unusually generous. Gift Aid donations and, for couples, redistributing income-producing assets to a lower-earning spouse can also help.
Does the trap apply to bonus pay?
Yes. Bonuses count as employment income and feed into adjusted net income for the year they are paid. A bonus that lifts adjusted net income from below 100,000 pounds to above it triggers the personal allowance taper for that year. Employees with some flexibility on bonus timing can sometimes split a bonus across two tax years to mitigate the trap.
Does the trap include savings interest and dividends?
Yes. Adjusted net income is total taxable income from all sources, including salary, bonus, savings interest (above the personal savings allowance), dividends (above the dividend allowance), rental income, and certain taxable benefits. Pension contributions and Gift Aid donations grossed up are the principal deductions in the calculation.
Is there a similar trap higher up the income scale?
Yes, in different forms. The additional rate of 45 percent applies above 125,140 pounds (the threshold was reduced from 150,000 pounds in April 2023). There is also a tapered pension annual allowance that reduces the contribution limit for taxpayers with very high threshold and adjusted income, creating a different sort of trap on the deductibility of contributions for high earners. These bands are less commonly called "traps" but produce similar marginal-rate distortions.
