£100,000 after tax

The 60% tax trap explained

The headline take-home figure on £100,000 doesn't tell the most important story. The real story is what happens to the next pound you earn.

Above £100,000, your personal allowance starts being withdrawn — £1 of allowance disappears for every £2 of income above the threshold. By £125,140, your entire £12,570 allowance is gone. Combined with the 40% higher rate, that means every extra pound you earn in this band actually loses you:

• 40p in Income Tax on the pound itself
• 20p in extra Income Tax on the 50p of personal allowance you just lost
• 2p in National Insurance

That's 62p of every extra pound going to HMRC — an effective marginal tax rate of 62% on income between £100,000 and £125,140. The 60% figure you've seen quoted in the press strips out NI for simplicity; in reality it's 62%.

Why £100k is the worst pay rise you'll ever get

The cruel maths: a £25,000 pay rise from £100,000 to £125,000 increases your take-home by only about £9,500 — an effective tax rate of 62% on the increase. If your bonus or pay rise lands inside this band, you lose more of it to HMRC than at any other point on the UK tax schedule, including additional rate at 45%.

Notice the oddity: take-home at £125,140 is barely higher than at £120,000. The 62% marginal rate eats most of that extra £5,140 of gross.

How to escape the 60% trap

The 60% trap is the most effective argument for pension salary sacrifice in the UK tax system. Pension contributions reduce your adjusted net income, which is the figure HMRC uses to taper your personal allowance. Sacrifice enough to drop your adjusted net income back to £100,000 and you fully reclaim your £12,570 allowance.

Worked example: £120,000 salary

Without sacrifice: £120,000 gross → £78,000 take-home (effective tax rate 35%).

Sacrifice £20,000 into pension (16.7%): effective salary £100,000 → £68,557 take-home + £20,000 in pension. You've "lost" £9,443 of take-home but gained £20,000 in retirement savings. The £10,557 difference is the tax saving — that's an effective rate of 53% on the sacrificed amount, the most efficient pension contribution in the UK tax code.

Try the salary sacrifice calculator with £120,000 pre-filled →

Other ways to reduce adjusted net income

• Gift Aid donations — reduce adjusted net income for personal allowance calculation purposes.
• EV salary sacrifice — counts as a reduction in gross salary, so works the same way as pension sacrifice for the allowance taper.
• Childcare voucher residual schemes — for those still in the closed-to-new-joiners scheme.

£100,000 in different formats

Other things that happen at £100,000

Tax-free childcare disappears

If either parent earns over £100,000 (adjusted net income), the household loses access to Tax-Free Childcare (the 20% top-up on childcare costs, up to £2,000 per child per year) and 30 hours free childcare for 3–4 year olds. This can cost a family with two young children £4,000+ a year on top of the marginal-rate hit — making the effective marginal rate around £100k closer to 70–80% for affected families. Pension sacrifice below £100k restores both benefits.

Self Assessment becomes mandatory

HMRC requires anyone earning over £150,000 to file Self Assessment. The threshold was previously £100,000 but was raised in 2023/24. If your only income is PAYE you may still not need to file, but anyone with side income, dividends, rental property or significant savings interest probably does.

High Income Child Benefit Charge

HICBC tapers Child Benefit between £60,000 and £80,000 (raised in 2024/25 from the previous £50k–£60k band). At £100k you're past the taper — Child Benefit is fully clawed back if you receive it. Most people in this band choose not to claim Child Benefit at all to avoid the admin.