The £100k “tax trap” is really the Personal Allowance taper. Once adjusted net income goes above £100,000, HMRC reduces Personal Allowance by £1 for every £2 over the line until it reaches £0 at £125,140.
What the £100k tax trap is, and why it stings
The £100k tax trap is not a separate tax. It is what happens to your Personal Allowance once your Adjusted Net Income passes £100,000: HMRC withdraws £1 of tax-free allowance for every £2 you earn over the line, until the allowance disappears completely at £125,140.
Because you lose allowance and pay tax on the extra income at the same time, every pound between £100,000 and £125,140 is effectively taxed at around 60%. That is why a pay rise or bonus in this band can feel like it barely reaches your bank account — and why a pension contribution that pulls your ANI back under £100,000 is often worth far more than its headline cost.
Worked examples
These examples answer the practical question most readers care about: whether they stay below the taper, fall into it, or pull themselves back out of it.
ANI £99,500
Full Personal Allowance usually kept. If ANI stays below £100,000, the taper has not started.
The upside: being just under the line keeps the position much simpler.
ANI £104,000
About £2,000 of Personal Allowance lost. HMRC cuts the allowance by £1 for every £2 above £100,000.
What’s really happening: the extra tax feeling in this band comes from the shrinking allowance, not a special extra tax rate.
ANI £108,000 with an £8,000 gross pension
ANI can fall back to around £100,000. A qualifying pension contribution can remove the taper issue altogether.
The main lever: pension is one of the most practical tools near this threshold.
Salary below £100k, bonus pushes ANI over
The taper can still bite. A bonus, taxable benefits or other taxable income can move ANI above the line even if base salary does not.
The trap: “my salary is under £100k” is not always the end of the story.
How to soften the £100k tax trap
If your income lands in the £100,000 to £125,140 band, the useful question is what you can actually do about it. Two reliefs do most of the work: qualifying pension contributions and Gift Aid each reduce your Adjusted Net Income pound for pound, so the right contribution can claw back some — or all — of the Personal Allowance you would otherwise lose.
The pain point is the allowance taper, not a separate named tax
People often call this the “£100k tax trap” because extra income can lead to more tax than expected once Personal Allowance starts shrinking. The mechanism is simple: ANI above £100,000 gradually erodes the allowance.
Check how far above £100,000 your ANI really is
If you are only a little over the line, the planning question is often whether pension contributions or Gift Aid can bring ANI back down enough to keep more or all of the allowance.
What can push you into the taper
- Bonuses and taxable benefits: a £6,000 bonus on £98,000 tips you over
- Other taxable income on top of salary: £2,000 of savings interest counts too
- Using salary instead of ANI: a £99,000 salary can still be £101,000 ANI
What can pull you back out
- Qualifying gross pension contributions: £4,000 gross moves £104,000 back to £100,000
- Grossed-up Gift Aid donations: £800 donated counts as £1,000 off ANI
- Checking all income and reliefs properly: add every source, then subtract the reliefs
What people often miss
These are the common misunderstandings that make the £100k pages feel harder than they need to be.
Treating £100k as a salary-only rule
The threshold uses adjusted net income, not just salary. Benefits, bonuses and other taxable income can matter just as much as base pay.
Forgetting that a small gap can still matter
When ANI is close to £100,000, a relatively modest pension contribution or Gift Aid amount can change the result more than people expect.
Check the ANI number first, then compare pension and bonus scenarios
That gives you the clearest view of whether the taper has started, how much allowance is being lost, and whether you can move the result meaningfully.
Continue reading
Move to the next page that usually matters once the taper is on your radar.
Questions people usually ask
What is the £100k tax trap?
It is the effect of losing your Personal Allowance once your adjusted net income passes £100,000. HMRC removes £1 of allowance for every £2 over the line, so income in this band is taxed unusually heavily.
Why is the effective tax rate around 60%?
Between £100,000 and £125,140 you pay tax on the extra income and lose tax-free allowance at the same time, which together work out at roughly a 60% effective rate.
At what income does the Personal Allowance disappear completely?
Your full Personal Allowance is gone once adjusted net income reaches £125,140, because by then the £1-for-£2 taper has removed all of it.
Does the £100k trap use salary or adjusted net income?
It uses adjusted net income, so bonuses, benefits and other income count, while pension contributions and Gift Aid can bring the figure back down.
How can I avoid the 60% tax trap?
The most direct route is a qualifying pension contribution, which lowers your adjusted net income and can keep some or all of your Personal Allowance.
Is it worth earning over £100,000?
More gross pay still leaves you better off overall, but the take-home gain on income between £100,000 and £125,140 is smaller than usual because of the allowance taper. That trade-off is what this page helps you see.
| Primary source | How PayPrecise uses it | Link |
|---|---|---|
| Income Tax rates and Personal Allowance | Current taper points for Personal Allowance. | View source |
| Adjusted net income guidance | ANI method used to test the threshold. | View source |
| Gift Aid and pension rules | Relief treatment that can reduce ANI. | View source |
This page is designed to give you a quick, transparent estimate. It is not personal tax advice, and it does not replace checking your exact HMRC position.