What actually happens at £100,000
Every British taxpayer begins with a personal allowance, the portion of income that carries no tax, fixed at £12,570 for 2026/27. It holds for everyone until earnings clear £100,000, at which point it starts to erode.
The mechanism is straightforward: every £2 of income above £100,000 strips away £1 of allowance. By £125,140 the entire £12,570 has gone, leaving you taxed from the very first pound.
That withdrawal is what people call the trap, and the arithmetic behind the 60% figure runs like this:
- On earnings above £100,000, you're already paying 40% income tax (higher rate)
- The personal allowance withdrawal means you're also losing £0.50 of allowance for every extra £1 earned
- That lost allowance was protecting £0.50 from 40% tax = 20p of additional tax
- Total: 40p from higher rate + 20p from allowance withdrawal = 60p per £1 earned
The numbers in practice
Picture three senior software engineers working in Britain:
| Gross Salary | Annual Take-Home | Monthly | Effective Rate |
|---|---|---|---|
| £95,000 | £63,000 | £5,250 | 33.7% |
| £112,570 (allowance fully gone) | £69,462 | £5,789 | ~38.3% |
| £125,140 | £76,278 | £6,357 | 39.1% |
Study the move from £95,000 to £112,570. Gross pay climbs by £17,570, and yet only £6,462 of that ever arrives in the account, which is 36.8 pence in the pound across the whole stretch. Some of it is taxed at the full 60p.
A blunter illustration: a rise from £100,000 to £103,000 adds £3,000 on paper. After the 60% effect has run its course, £1,200 a year remains. The manager who approved it thinks they handed over an extra £250 a month. What actually arrived was £100.
Who ends up caught by it
Many more people occupy this band than you would expect, and in London the familiar names between £100k and £125k include:
- Mid-career city solicitors (3-5 PQE at Silver Circle or Magic Circle firms)
- Senior software engineers at product companies and scale-ups
- NHS consultants at entry to mid scale
- Finance professionals: VPs at investment banks, senior managers at Big Four
- Senior civil servants (Grade 6-7 in some departments)
- Experienced GPs on the higher end of the BMA salaried scale
Hardly an exotic list. A great many employers set pay in this range without pausing to consider what their employee ends up holding.
The legitimate escape: pension salary sacrifice
This is where competent advice repays itself several times over. The standard move is to raise pension contributions far enough that adjusted net income drops back below £100,000.
Suppose your salary is £115,000 and you want the allowance restored. Taxable income needs to fall by £30,000 in allowance terms, since £30,000 multiplied by 50p returns £15,000 of allowance, and recovering the full £12,570 means pulling income down to £100,000. A pension contribution of £15,000 brings adjusted net income to £100,000 and hands the allowance back whole.
The tax saved on that £15,000 contribution is roughly £9,000, courtesy of the 60% rate across that band. Cash take-home drops by £6,000 a year, or £500 a month, while £15,000 arrives in the pension. Put another way, £15,000 of retirement saving costs £6,000 of spending money, a return of about 250% on the cash surrendered, before any investment growth at all.
Advisers regularly describe this as the sharpest piece of tax planning available anywhere in Britain, for the straightforward reason that the 60% band magnifies the saving so heavily.
Childcare adds a second twist
Parents run into a further complication. Tax-Free Childcare, worth up to £2,000 a year per child, demands that both parents keep adjusted net income below £100,000. Go a single pound over and the whole family loses the scheme. There is no taper, only a cliff.
With two children in nursery that cliff is costly: roughly £4,000 a year vanishes at the threshold. Pile it on top of the disappearing allowance and the marginal rate on income between £99,000 and £101,000 can exceed 60% for those households. For that narrow group, £100,000 is a genuinely hazardous number.
Self-assessment catches people out
Earning above £100,000 under PAYE, your code has most likely already been adjusted, though it is worth checking. HMRC is meant to remove the allowance once you pass £125,140, but a mid-year rise often means the correction lands late.
Anyone above £100,000 should be filing a self-assessment return every year. If you are unsure whether the requirement reaches you, work on the assumption that it does.
See exactly what you keep: our UK salary calculator shows the allowance withdrawal at every salary point, the 60% band included. Try any figure between £95,000 and £130,000 to watch the curve bend.
A last thing worth knowing
Both the £125,140 ceiling and the £12,570 allowance have been frozen. With wages continuing to rise, that freeze drags new people into the band every year without anyone getting a real pay increase. Fiscal drag is the usual term, and it accounts for much of the lengthening queue of taxpayers filing returns and discovering how the effective rate structure actually behaves.
What compounds it is that nobody ever legislated a 60% band at all. It emerged from the arithmetic when the allowance taper was introduced in 2010, and more than a decade later it sits there quietly, catching a wider group each year.