Guide · Pension relief

The personal allowance taper and the 60% tax trap

Why earning between £100,000 and £125,140 gives a 60% marginal tax rate, how the taper works and how pension contributions avoid it. Start by take total income, subtract gross pension contributions and Gift Aid donations. This is the figure the taper uses.

By Uthman ChoudhuryPublished 20 September 2026Updated 20 September 2026

Skip the reading: use the Pension Contribution Calculator for your own numbers.

How do you work out the personal allowance taper?

Work out adjusted net income. Take total income, subtract gross pension contributions and Gift Aid donations. This is the figure the taper uses.
Find the excess over £100,000. If adjusted net income is £110,000, the excess is £10,000.
Halve it. The allowance falls by £1 for every £2 of excess: £10,000 excess removes £5,000 of allowance, leaving £7,570.
Tax the extra income twice. The lost allowance is taxed at 40% on top of the 40% due on the income itself, giving 60% plus 2% NI.
Consider a pension contribution. Contributing the excess to a pension restores the allowance, so £10,000 into a pension can cost as little as £4,000.

What is the personal allowance taper?

The personal allowance of £12,570 is reduced by £1 for every £2 of adjusted net income above £100,000. Between £100,000 and £125,140 you therefore pay 40% tax on each extra pound and 40% on the 50p of allowance you lose, an effective income tax rate of 60%. With 2% National Insurance the marginal rate is 62%, higher than the 47% paid by someone on £200,000.

Worked example: £100,000 to £110,000

On £100,000 take-home pay is £68,557. On £110,000 it is £72,357. The extra £10,000 of salary is worth only £3,800 after tax, because the allowance drops from £12,570 to £7,570 and income tax rises by £6,000.

If the £110,000 earner puts £10,000 into their pension by salary sacrifice, adjusted net income falls back to £100,000, the full allowance returns and the net cost of the contribution is £3,800: £10,000 in the pension for £3,800 of take-home pay, an effective relief rate of 62%.

What do people get wrong about the taper?

Thinking PAYE handles it automatically. Your tax code only reflects the taper if HMRC knows your expected income. Many people get a bill through Self Assessment.
Ignoring relief-at-source pensions. Gross contributions to a SIPP reduce adjusted net income too, but you must claim the higher rate relief and the taper adjustment via your return.
Forgetting benefits in kind. A company car or medical insurance counts as income for the taper.

Model your own figures in the pension tax relief calculator and the pay rise calculator.

Frequently asked questions

At what income is the personal allowance zero?

At £125,140 of adjusted net income. Every £2 above £100,000 removes £1 of the £12,570 allowance, so it is gone once you are £25,140 over the threshold.

Does a bonus that takes me over £100,000 lose my allowance?

Yes, for that tax year. The taper is based on the year's total adjusted net income, so a one-off bonus can push you into the 60% band for that year even if your salary is below £100,000.

What else changes at £100,000?

Tax-free childcare and the 30 hours free childcare entitlement both stop when either parent's adjusted net income exceeds £100,000, with no taper. For parents of young children this cliff edge can be worth more than the tax itself.