The 60% tax trap between £100,000 and £125,140
Once your adjusted net income goes over £100,000, your tax-free Personal Allowance of £12,570 starts to shrink. You lose £1 of it for every £2 of income above £100,000, so it has gone completely at £125,140.
Why that works out at 60%
Take an extra £100 of salary in that band. You pay 40% higher-rate tax on it, which is £40. It also removes £50 of your Personal Allowance, and that £50 is now taxed at 40% too: another £20. So £60 of the £100 goes in income tax. With 2% National Insurance on top, you keep £38.
| Adjusted net income | Personal Allowance | Rate on the next £1 |
|---|---|---|
| £100,000 | £12,570 | 40% (42% with NI) |
| £110,000 | £7,570 | 60% (62% with NI) |
| £125,140 and above | £0 | 45% from £125,140 (47% with NI) |
How pension contributions help
Pension contributions made before tax (salary sacrifice or a net pay scheme) lower your adjusted net income pound for pound. Personal pension contributions (relief at source) lower it by the gross amount, which is what you pay plus the 25% the pension provider claims from HMRC.
So someone on £110,000 who sacrifices £10,000 into their pension brings their adjusted net income back to £100,000. They save £6,000 in income tax and £200 in National Insurance, so £10,000 goes into their pension for £3,800 less take-home pay.
Two things to watch
- The trap often matters less than what else you lose at £100,000: 30 funded hours and Tax-Free Childcare stop completely at £100,000 and £1.
- From April 2029 only the first £2,000 a year of pension salary sacrifice will be free of National Insurance. The income tax saving is unchanged. See salary sacrifice, net pay and relief at source.
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Checked 31 October 2026 for England. This guide is general information, not financial advice.