The £100,000 tax trap

Have dividend income too? Use the dividend tax calculator to include salary, dividends and the personal allowance taper.

The 100k tax trap takes 60% of extra earnings in Income Tax between £100,000 and £125,140 in England, Wales and Northern Ireland. Employee National Insurance takes the combined rate to 62%.

Budget changes: see the tracker.

How much is your annual take-home pay?

Gross annual salary
Pension salary sacrifice
Adjusted net income
Personal allowance after taper
Taxable income
Total income tax
Employee NI
NI in the main band
NI above the upper earnings limit
Effective tax and NI rate on gross salary
Marginal tax and NI rate on the next pound
Income tax saved by pension sacrifice
NI saved by pension sacrifice
Total tax and NI saved
Reduction in take-home pay for this pension sacrifice

Income tax by band. Rates and thresholds: GOV.UK, prepared 25 October 2026.
Band	Rate	Income in band	Tax
Basic	20%
Higher	40%
Additional	45%
Starter	19%
Basic	20%
Intermediate	21%
Higher	42%
Advanced	45%
Top	48%

Notes on these figures

Tax year: 2026-27. Last checked: 25 October 2026.

Rates and allowances for the stated tax year. Check after the Budget on 28 October 2026.

Scottish non-savings income bands for 2026-27, from GOV.UK Scottish Income Tax. Savings and dividends are excluded.

Annual salary model using the linked HMRC rates and allowances. Other income and tax codes are excluded.

Assumptions

Annual salary only. Pension contribution is salary sacrifice, reducing both income tax and employee NI. Relief at source is out of scope. Employee Class 1 NI, below State Pension age, using annual thresholds. Actual NI is assessed per pay period. The marginal rate is the rate on the next pound: the extra tax and NI on salary plus £1, with pension sacrifice fixed. Tax bands apply to taxable income after the tapered personal allowance. Amounts are rounded to pennies for display.

Not modelled

Other income, benefits in kind, tax codes, student loans and other deductions. Gift Aid, relief at source pensions, pension annual allowances and the minimum wage limits on salary sacrifice. Employer NI and individual pay-period rounding.

Sources: HM Treasury: Budget 2026 rates and allowances; GOV.UK: Scottish Income Tax, UK rates on dividends; GOV.UK: Tax on dividends; HMRC SAIM1080: the dividend allowance is a nil rate; HMRC SAIM1090: dividends are the highest part of total income; GOV.UK: Income Tax rates and personal allowance taper. Prepared 25 October 2026.

How does the £100k tax trap work?

Above £100,000.00 of adjusted net income, the personal allowance falls by £0.50 per extra pound. It reaches zero at £125,140.00. Adjusted net income includes taxable income beyond salary, less certain reliefs.

The engine gives a marginal Income Tax rate of 60% in England, Wales and Northern Ireland within the taper. This is the rate on extra earnings, not all income. Employee National Insurance adds 2%, making 62% in total. Scottish Income Tax differs.

What happens to take-home at each salary?

Annual GBP. UK engine, GOV.UK 2026-27, checked 25 October 2026. England, Wales and Northern Ireland, no pension sacrifice. Take-home deducts Income Tax and employee NI.
Salary	Personal allowance	Income Tax	Take-home
£100,000.00	£12,570.00	£27,432.00	£68,557.40
£105,000.00	£10,070.00	£30,432.00	£70,457.40
£110,000.00	£7,570.00	£33,432.00	£72,357.40
£115,000.00	£5,070.00	£36,432.00	£74,257.40
£120,000.00	£2,570.00	£39,432.00	£76,157.40
£125,140.00	£0.00	£42,516.00	£78,110.60
£130,000.00	£0.00	£44,703.00	£80,686.40

What do the rules allow?

How does Gift Aid reduce adjusted net income?

Eligible Gift Aid donations reduce adjusted net income by their grossed-up amount, including basic-rate relief claimed by the charity. You must have paid enough UK Income Tax or Capital Gains Tax to cover that relief.

The calculator models salary sacrifice into a pension. It does not model Gift Aid, relief-at-source contributions or contribution limits.

Last updated: 25 October 2026.

Why does an extra £100 leave only £38?

Within the taper, £100 of extra pay attracts £40 of higher-rate Income Tax. It also removes £50 of personal allowance, adding £20 of tax. Employee National Insurance takes another £2. The employee keeps £38, using HMRC's 2026-27 rules for England, Wales and Northern Ireland.

The ordinary personal allowance is £12,570. It falls by £1 for each £2 of adjusted net income above £100,000 and reaches zero at £125,140. Adjusted net income includes taxable income after specified deductions. Savings, rent and taxable benefits can bring someone into the taper even when salary alone stays below it.

Can pension contributions reduce the 100k tax trap?

Qualifying contributions can reduce adjusted net income. The method matters: salary sacrifice reduces contractual salary, while relief at source uses a gross contribution that includes relief added by the provider. The calculator above models salary sacrifice only.

The contribution goes into a pension for later use. Check annual allowances and eligibility separately. The UK pensions abroad guide explains why later withdrawals need their own tax assessment.

Does the £100,000 limit affect childcare?

Tax-Free Childcare stops if either partner expects adjusted net income above £100,000. England's working-parent childcare entitlement has a separate eligibility test with that income limit. The value lost depends on actual childcare use and eligibility.

Child Benefit has a different charge and income range. The salary table excludes childcare losses, so it cannot show a complete change in household spending power.

Does Scotland have the same tax trap?

The personal allowance taper applies across the UK. Scottish employment Income Tax bands differ, so the combined rate changes. Choose Scotland in the calculator to use the separate schedule.

The fiscal drag guide explains how fixed thresholds change the tax share as pay rises. The country comparison applies the salary engines to a different question.

Last updated: 25 October 2026.

Should the £100,000 taper threshold rise?

Opinion. This section gives the view of Flight Risk Capital.

Moving the threshold would leave the taper's uneven marginal rate in place. Redesigning allowance withdrawal is a separate choice. Either change needs a published revenue costing and a funding decision; an inflation comparison supplies neither.

What else do readers ask?

What is the 100k tax trap?

The withdrawal of personal allowance produces a 60% Income Tax rate on extra earnings within the taper in England, Wales and Northern Ireland. Employee National Insurance is separate.

Does the 60% rate apply to all my salary?

No. It applies to extra income in the taper range. The table calculates the whole-salary tax and take-home result.

Can pension contributions reduce the 100k tax trap?

Qualifying contributions can reduce adjusted net income. The method and tax limits matter. This calculator models salary sacrifice only.

Does earning over £100,000 affect childcare?

Tax-Free Childcare stops if either partner expects adjusted net income above £100,000. England’s working-parent entitlement has a separate eligibility test with that income limit.

Sources

HMRC: Income Tax rates and allowances, 24 October 2026.
HMRC: National Insurance rates and categories, 24 October 2026.
HMRC: Personal Allowances: adjusted net income, 24 October 2026.
HMRC: Scottish Income Tax, 24 October 2026.
HMRC: Tax-Free Childcare eligibility, 24 October 2026.
Department for Education: Free childcare if you are working: eligibility, 24 October 2026.
HMRC: Tax on private pension contributions, 24 October 2026.
UK Parliament: Finance Act 2009, section 4, 2009.
ONS: Consumer price inflation, UK: June 2026 and CPI series D7BT, 22 July 2026.

HMRC: Gift Aid. Reference recorded 25 October 2026.

See the Budget tracker for announcements and effective dates.