Key points
- Income between £100,000 and £125,140 is taxed at an effective 60%, because you lose £1 of Personal Allowance for every £2 you earn.
- At £110,000 you keep £380.00 of each extra £1,000, after Income Tax and National Insurance.
- A pension can win the allowance back. Sacrificing £10,000 into a pension on £110,000 costs you only £3,800.00 of take-home pay.
- By £125,140 the allowance is gone, and you pay tax from the first pound.
Work out your own
Put in your salary and pension to see how much of the 60% band you are in.
Open the take-home pay calculatorWhy it happens
Everyone starts with a Personal Allowance of £12,570 of tax-free income. Once your adjusted net income goes over £100,000, you lose £1 of that allowance for every £2 above the limit, so it is gone completely at £125,140.
Each extra £100 you earn in this range is taxed at 40%, which is £40. It also removes £50 of your allowance, and that £50 is now taxed at 40% too, another £20. That is £60 of tax on £100: an effective rate of 60%. Add 2% National Insurance and you keep £380.00 of each extra £1,000 at £110,000.
What it costs at each salary
| Salary | Personal Allowance | Income Tax | Take-home |
|---|---|---|---|
| £100,000 | £12,570 | £27,432.00 | £68,557.40 |
| £105,000 | £10,070 | £30,432.00 | £70,457.40 |
| £110,000 | £7,570 | £33,432.00 | £72,357.40 |
| £115,000 | £5,070 | £36,432.00 | £74,257.40 |
| £120,000 | £2,570 | £39,432.00 | £76,157.40 |
| £125,140 | £0 | £42,516.00 | £78,110.60 |
Between £100,000 and £125,140 your Income Tax rises by £15,084.00 on £25,140 of extra pay.
Using a pension to win the allowance back
The limit is based on adjusted net income, which is your income after pension contributions and Gift Aid. Bring it back to £100,000 and the whole allowance returns.
On a salary of £110,000, sacrificing the £10,000 above the limit into a pension puts £10,000.00 in your pot, but your take-home pay falls by only £3,800.00 a year, because that slice was being taxed at 60% plus National Insurance. See it in the calculator.
Contributions to a relief-at-source pension and Gift Aid donations work too: they are grossed up and taken off your adjusted net income, and you claim the extra relief through Self Assessment.
Other things that change at these incomes
From £60,000 the High Income Child Benefit Charge starts to take back Child Benefit, and above £100,000 you also lose tax-free childcare and some free childcare hours. Pension contributions that lower your adjusted net income help with these as well. Scotland has the same allowance taper, with its own tax rates on top.
Bottom line
The 60% rate is not a band on any tax table: it comes from losing your Personal Allowance. If your income is between £100,000 and £125,140, every pound you move into a pension costs you far less than a pound.
Tips
- The test uses adjusted net income: a bonus, savings interest or rental profit can push you over the limit even if your salary is under it.
- If you pay into a personal pension or give to charity with Gift Aid, claim the extra relief on a Self Assessment tax return; it is not automatic.
- Above £100,000 you also lose Tax-Free Childcare. Bringing your adjusted net income under the limit restores it too.
This guide explains the rules; it is not personal financial advice.