Does the £100k threshold include bonuses?

Yes. Adjusted Net Income includes all taxable income: salary, bonuses, RSU vestings, dividends, rental income and any other taxable sources, minus pension contributions and Gift Aid.

Can I avoid the trap by splitting income with my partner?

You cannot split employment income. However, if you have joint investments or rental property, structuring ownership may help. The most practical route for most employees is increasing pension contributions.

Does this affect Scottish taxpayers too?

Yes. The Personal Allowance taper is a UK-wide HMRC rule, not set by the Scottish Parliament. Scottish taxpayers have different income tax bands but the same taper applies from £100,000.

I earn over £125,140. Does any of this still matter?

Above £125,140 your Personal Allowance is fully gone. You no longer face the 60% trap. In England, Wales and Northern Ireland your marginal rate is 45%. In Scotland it is 48%. You may still benefit from pension contributions for other reasons such as reducing HICBC liability or general tax efficiency.

Is the £100,000 threshold frozen?

Yes. The £100,000 threshold has been frozen since it was introduced in 2010. It is not linked to inflation. As wages rise, more people are dragged into the trap each year.

The £100k Tax Trap: Why You Lose 60p of Every Pound Over £100,000

This guide uses 2026/27 tax year rules unless stated otherwise. Scottish rates and childcare rules can differ.

What is the £100k tax trap?

The Personal Allowance is the amount you can earn before paying any income tax. For 2026/27 it is £12,570. But once your Adjusted Net Income (ANI) exceeds £100,000, HMRC starts taking that allowance away.

For every £2 you earn above £100,000, you lose £1 of Personal Allowance. By the time your ANI reaches £125,140, the entire £12,570 allowance is gone.

The result is an effective 60% marginal rate on income between £100,000 and £125,140. You pay 40% income tax, plus you lose 20% worth of Personal Allowance that was previously shielding income from tax.

How the Personal Allowance taper works

The taper is a straightforward formula:

Start with your full Personal Allowance: £12,570
Calculate how much your ANI exceeds £100,000
Divide that excess by 2
Subtract from your allowance

Example

If your Adjusted Net Income is £110,000, you are £10,000 over the £100,000 threshold. That means you lose £5,000 of Personal Allowance. Your remaining Personal Allowance is £7,570.

The £5,000 of allowance you lost was sheltering income that would have been taxed at 40%. So you pay an extra £2,000 in tax just from the taper. Combined with the 40% on the £10,000 itself, you pay £6,000 on that extra £10,000: an effective 60%.

A worked example: £110,000 salary

Here is what the numbers look like at £110,000 compared to just under £100,000:

	ANI £99,999	ANI £110,000
Personal Allowance	£12,570	£7,570
Allowance lost	£0	£5,000
Extra tax from taper	£0	£2,000
Marginal rate	40%	60%
Tax-Free Childcare	Eligible	Not eligible

That extra £10,000 of income costs you £6,000 in tax and lost allowance. And if you have children, you usually also lose access to Tax-Free Childcare (worth up to £2,000 per child per year) once your ANI goes over £100,000.

See your exact numbers

Enter your salary, pension and household details. CliffGuard calculates your ANI, marginal rate and shows you exactly how much you could save.

Check my position

Takes about 3 minutes. No sign-up needed.

The real cost: what you lose beyond tax

The 60% rate is painful enough. But crossing £100,000 can also trigger other losses:

Tax-Free Childcare: Usually lost once ANI goes over £100,000. Worth up to £2,000 per child per year (£4,000 for disabled children).
30 hours free childcare (England): Also usually lost above £100,000 for children aged 9 months to school age.
Marriage Allowance: You cannot receive the Marriage Allowance transfer if your income exceeds the basic rate limit.

For a household with two young children, crossing £100,000 by even £1 could cost over £4,000 in lost childcare benefits on top of the extra tax.

What happens after £125,140?

At £125,140, your Personal Allowance is fully gone, so the 60% taper zone ends.

That does not mean your tax drops back to 40% everywhere.

In England, Wales and Northern Ireland, income above £125,140 is taxed at 45%
In Scotland, the rates are different

So the trap ends at £125,140, but that is not the same thing as saying tax becomes low again.

Three ways to bring your ANI below £100k

The most common strategies to escape the 60% trap are:

1. Salary sacrifice into your pension. Your employer redirects part of your salary to your pension before tax. This lowers your gross salary (and therefore your ANI) while saving both income tax and National Insurance. It is generally the most efficient route if your employer offers it.

2. Personal pension contributions (SIPP). You contribute from your net pay and your provider claims 20% basic rate relief. You can then claim the remaining higher-rate relief through Self Assessment or by asking HMRC to adjust your tax code. The gross contribution reduces your ANI.

3. Gift Aid donations. Net donations are grossed up by 25% and the gross amount reduces your ANI.

Salary sacrifice is generally the best option because it can save NI as well as income tax. But it requires your employer to offer it. A SIPP gives you full control. Use CliffGuard's strategy explorer to compare all three side by side.

How to check your position

If you think you might be near the £100,000 threshold, the first step is working out your exact ANI. This includes all taxable income (salary, bonuses, RSU vestings, dividends, rental income) minus pension contributions and Gift Aid.

CliffGuard calculates this automatically. Enter your income details and it shows your ANI, marginal rate, Personal Allowance, childcare eligibility and the exact pension contribution needed to get below £100,000.

Sources checked: GOV.UK Income Tax, Tax-Free Childcare, Child Benefit, pension tax relief and Scottish Income Tax guidance.