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UK Pay & Tax

£100,000 tax trap 2026-27: where does the 60% come from?

DaddyNotePosted 14 Oct 2026Sources checked 14 Oct 2026

Between £100,000 and £125,140 of adjusted net income, each extra £2 removes £1 of Personal Allowance, so a 40% taxpayer ends up paying 60% income tax on that slice. The arithmetic for 2026-27, using HMRC's own bands.

It was late on a weeknight, the kitchen light off, just the laptop glow and a spreadsheet I'd built to sanity-check a pay figure. I typed in two salaries, ten thousand pounds apart, and looked at the tax column.

I'd always believed 45% was the most anyone in England could lose on an extra pound. The spreadsheet said otherwise. I went back and checked the formula. Then I checked it again.

The formula was fine. The rate really did come out higher than any rate HMRC publishes.

So where does that number come from, if it isn't in the tables?

There's no 60% rate, and yet the sums land there

This is what threw me. There is no 60% rate anywhere in HMRC's tables. The rates for England, Wales and Northern Ireland in 2026-27 are 20%, 40% and 45%.

The 60% comes from one sentence on GOV.UK:

"Your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above."

Read it slowly and the trick appears. Each extra £1 you earn in that range is taxed twice over.

The £1 itself is taxed at 40%, which is 40p. And 50p of your Personal Allowance disappears. That 50p was tax-free, and now it's taxed at 40% too, which is another 20p.

40p + 20p = 60p on every £1, until the allowance reaches zero.

Why does it stop at £125,140, of all places? I wondered that too.

The standard Personal Allowance is £12,570. Losing £1 for every £2 means it's gone after £12,570 × 2 = £25,140 of extra income. £100,000 + £25,140 = £125,140. Above that point you're back to a normal marginal rate: 40%, then 45% on income over £125,140.

So it isn't a rate at all. It's a rate plus a vanishing allowance, stacked on top of each other.

Working the two salaries through, line by line

I didn't want to trust the shortcut on its own, so I rebuilt the spreadsheet sums by hand for 2026-27, outside Scotland.

HMRC's bands apply to income after allowances. The basic rate covers the first £37,700, the higher rate runs to £125,140, and the additional rate applies above that.

Salary £100,000

  • Personal Allowance: £12,570 (not yet reduced)
  • Taxable income: £87,430
  • £37,700 × 20% = £7,540
  • £49,730 × 40% = £19,892
  • Income tax: £27,432

Salary £110,000

  • Excess over £100,000: £10,000, so the allowance falls by £5,000 to £7,570
  • Taxable income: £102,430
  • £37,700 × 20% = £7,540
  • £64,730 × 40% = £25,892
  • Income tax: £33,432

Extra income: £10,000. Extra income tax: £6,000. Effective rate on that slice: 60%.

Same answer as the spreadsheet. Oddly, that was more unsettling than if I'd found a mistake.

Is it only true for that one £10,000 slice? I ran the same method at the top of the range.

At £125,140, the allowance is zero and the whole £125,140 is taxable:

  • £37,700 × 20% = £7,540
  • £87,440 × 40% = £34,976
  • Income tax: £42,516

From £100,000 to £125,140, tax rises by £42,516 − £27,432 = £15,084 on £25,140 of extra income. That's exactly 60%, across the whole band.

Then there's National Insurance, which the 60% leaves out.

For category A employees, GOV.UK lists Class 1 National Insurance at 2% on earnings over £967 a week (£4,189 a month) for 2026-27. Weekly pay at a £100,000 salary is well above that. So an employee whose salary sits in this band usually loses about 62p of each extra £1, before any student loan or pension deductions.

Sixty-two pence. I sat back from the laptop for a minute after that one.

The figure to watch isn't your salary at all

This was the part that changed how I'd look at a pay review.

The taper is based on adjusted net income, which isn't the same as gross pay. GOV.UK's guidance says that, in broad terms, you start from taxable income and deduct certain reliefs. For Gift Aid donations and pension contributions that get relief at source, you deduct the grossed-up amount: £1.25 for every £1 you paid.

That's why pension contributions and Gift Aid come up in any discussion of this band. They can bring adjusted net income back towards £100,000, and the allowance with it.

Does that mean everyone in this band should do it? I don't think a blog can answer that. Whether it suits you depends on your wider circumstances. Check HMRC's guidance, or with an adviser, before you change anything.

Scotland is a slightly different story. Scottish taxpayers lose the Personal Allowance the same way above £100,000. Their rates in this range differ, though: 42% up to £75,000, then 45% "advanced rate" up to £125,140. The effective figure is therefore not 60%. Our Scottish vs English comparison covers the bands.

So, to sum up what that late spreadsheet taught me. There's no 60% rate in HMRC's tables. Between £100,000 and £125,140 the Personal Allowance tapers away, £1 for every £2, and that taper adds 20p to the 40p you already pay. For employees, National Insurance takes it to about 62p. And the line that matters is adjusted net income, not the salary on your contract.

The number in the tables and the number you actually pay can be two different things.

Have you ever looked at a pay rise and found that less of it arrived than you'd worked out in your head?

General information, not tax advice. For your own figures, check with HMRC or a qualified adviser.

Sources

Work it out for your own figuresUK take-home pay calculator 2026-27

Other posts in UK Pay & Tax