Why it happens
Everyone gets a £12,570 Personal Allowance. Once your adjusted net income passes £100,000, you lose £1 of allowance for every £2 you earn. So each extra £1 is taxed at 40%, and 50p of previously tax-free income becomes taxable at 40%: that's another 20%.
What it costs
A rise from £100,000 to £125,140 adds £25,140 of pay, but only £9,553 more take-home: you keep 38% of the raise after tax and 2% National Insurance.
How to avoid it
- Pension contributions reduce adjusted net income. Salary-sacrificing the £25,140 above £100,000 into a pension restores the full allowance; take-home would be £68,557 with £25,140 saved for retirement.
- Gift Aid donations also reduce adjusted net income.
- Above £100,000 you may also lose tax-free childcare and some free childcare hours, so the real cost can be higher.
Model your own salary in the UK take-home pay calculator using the pension options.
Frequently asked questions
Does the 60% rate apply in Scotland?
Yes, and it is higher: between £100,000 and £125,140 Scottish taxpayers face an effective 67.5%, because the band there is taxed at 45%.
Is the £100,000 threshold rising?
No. It has been fixed at £100,000 since 2010, so more people fall into the trap each year.
Written by Muhammad Raza. Last updated October 14, 2026.