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The £100k tax trap, explained: the 60% band and how a pension contribution escapes it
Between £100,000 and £125,140 the personal allowance is withdrawn at £1 for every £2 — an effective 60% marginal rate. Here is why, what else you lose, and the contribution that gets you back under £100,000.
Based on ITA 2007 (personal-allowance taper and adjusted net income), ITEPA 2003 (the High Income Child Benefit Charge), gov.scot (Scottish bands) and gov.uk (childcare).
6 min read · Last reviewed
— In short
The £100k tax trap is the band of income from £100,000 to £125,140 where the personal allowance is withdrawn at £1 for every £2 earned. Layered on the 40% higher rate, that withdrawal produces an effective 60% marginal rate, or 67.5% in Scotland. Adjusted net income also drives the Child Benefit clawback and the childcare cliff, and a gross pension contribution reduces it £1 for £1.
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Use the The £100k / 60% tax trap calculator with your figures and see the working. Free, with no sign-up required.
The “£100k tax trap” is a band of income where each extra pound costs 60p in tax — or 67.5p in Scotland — before National Insurance. It runs from £100,000 to £125,140. No tax rate creates it; the withdrawal of the personal allowance does, while the headline rates of income tax stop at 45%.
Why £100,000 is a cliff edge
The personal allowance is £12,570. Once an individual’s adjusted net income (the adjusted net income calculator works it out) passes £100,000, that allowance is withdrawn at £1 for every £2 above the threshold, reaching nil at £125,140. So each extra £1 in the band is taxed at the 40% higher rate and drags 50p of previously tax-free allowance into tax at 40%. The effective marginal rate is 60%.
ITA 2007 s.35 — abatement of the personal allowance above £100,000.
It is worse in Scotland
The personal-allowance taper is UK-wide. The rate at which the recovered allowance is taxed is not. A Scottish taxpayer in this band pays the 45% advanced rate, so the withdrawal adds 22.5% (45% × ½) on top — an effective 67.5% between £100,000 and £125,140, or about 69.5% once the 2% National Insurance is added. The tax trap calculator shows both, with a residence toggle.
The benefits you also lose
Adjusted net income drives more than the allowance. Between £60,000 and £80,000 the High Income Child Benefit Charge claws back 1% of Child Benefit for every £200 of income, so a household with children meets an even steeper effective rate in that band. Tax-Free Childcare and, in England, the working-parent funded-hours entitlement work differently: neither is available if either parent expects adjusted net income above £100,000. The actual value at stake depends on eligible childcare spend, child age and the other scheme rules; England’s universal 15 hours for 3- and 4-year-olds are separate.
ITEPA 2003 s.681B–681H (HICBC) ; gov.uk/tax-free-childcare (the £100,000 cliff).
How a pension contribution escapes it
A gross relief-at-source pension contribution reduces adjusted net income £1 for £1. The trap is defined by adjusted net income, so that contribution can bring ANI back towards £100,000 while the contribution lands in the pension. That can restore personal allowance and may satisfy the childcare income test, subject to timing and every other eligibility condition. Relief in the taper band can make a £1 contribution cost as little as 40p net in a simple rUK case (32.5p in the equivalent Scottish band); childcare support is not guaranteed cash and must be based on actual entitlement and spend.
Salary sacrifice can also reduce ANI and save employee National Insurance on the sacrificed pay. Its income-tax result can differ from relief at source or net pay depending on taxable income, income mix and contribution size. Scheme terms, minimum-wage rules and the annual allowance — including any available carry-forward — all need checking.
Put your own figures in: the £100k / 60% tax trap calculator sets a target adjusted net income and illustrates the additional contribution and modelled tax effects. Treat any childcare amount as a scenario, not a confirmed award.
Common questions
- What is the 60% tax trap?
- Between £100,000 and £125,140 of adjusted net income the personal allowance is withdrawn at £1 for every £2 earned. With the 40% higher rate, that withdrawal makes the effective marginal rate 60% on income in that band (67.5% in Scotland).
- How do I get out of the £100k tax trap?
- A gross relief-at-source pension contribution reduces adjusted net income £1 for £1. Bringing ANI back to £100,000 can restore the personal allowance and may satisfy the childcare income test, subject to the other eligibility rules. In a simple rUK case, relief through the 60% taper band can be worth 60p in the £1.
- Is the tax trap different in Scotland?
- Yes. The personal-allowance withdrawal still applies, but on top of the Scottish advanced rate of 45% it produces an effective 67.5% (about 69.5% with National Insurance) between £100,000 and £125,140.
Sources & grounding
Personal-allowance taper: ITA 2007 s.35 — the allowance is reduced by £1 for every £2 of adjusted net income above £100,000, reaching nil at £125,140 for a full £12,570 allowance.
Primary sources:ITA 2007 s.35
Adjusted net income: ITA 2007 s.58 — total income less grossed-up Gift Aid and grossed-up relief-at-source pension contributions.
Primary sources:ITA 2007 s.58
Scottish bands: gov.scot/publications/scottish-income-tax-rates-and-bands — the advanced rate (45%) combined with the PA withdrawal gives an effective 67.5% on £100,000–£125,140.
Primary sources:gov.scot/publications/scottish-income-tax-rates-and-bandsScottish Government income-tax rates and bands
HICBC: ITEPA 2003 s.681B–681H; gov.uk/child-benefit-tax-charge — 1% of Child Benefit per £200 of adjusted net income over £60,000, 100% at £80,000.
Primary sources:gov.uk/child-benefit-tax-chargeITEPA 2003 s.681B–681H
Childcare eligibility: gov.uk/tax-free-childcare; gov.uk/free-childcare-if-working — each parent must expect adjusted net income of £100,000 or less. Tax-Free Childcare is a top-up on eligible spend up to its cap; England’s working-parent funded hours also depend on child age and other eligibility conditions.
Primary sources:gov.uk/tax-free-childcaregov.uk/free-childcare-if-working
Pension relief: FA 2004 s.188–192 — a gross contribution reduces adjusted net income £1 for £1; salary sacrifice additionally saves employee National Insurance.
Primary sources:FA 2004 s.188–192
For planning and illustration purposes only. Verify all inputs against source documents. This explainer does not constitute financial or tax advice.
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