HENRY Knowledge · Updated 22 September 2026

How does the £100,000 tax trap work?

Understand the Personal Allowance taper, a worked example and the checks to make before changing pension contributions.

Mark Graham, founder and product editor · General education, not personal advice. AI-assisted content. Submitted for professional review; feedback remains pending and no approval or endorsement is implied. Tax examples concern 2026/27.

The short answer

For 2026/27, the standard Personal Allowance is £12,570. It falls by £1 for each £2 of adjusted net income above £100,000 and reaches zero at £125,140. For employment income in England, Wales and Northern Ireland, the combination of 40% income tax and lost allowance creates an effective 60% income-tax rate within that interval. This is a marginal rate, not the rate on your entire salary. Scotland has different employment-income rates. HMRC rates and allowances.

A worked illustration

Assume only employment income, the standard allowance and no pension deductions. Moving from £100,000 to £110,000 removes £5,000 of allowance. The extra £10,000 attracts £4,000 of income tax, and losing the allowance adds another £2,000: £6,000 more income tax in total. Employee National Insurance is separate and reduces the cash retained further.

Start with the decision, not the threshold

If your question is specifically how to estimate the pension amount, use our guide to working out the gross contribution gap. It distinguishes salary sacrifice from a relief-at-source payment.

A tax saving is useful only if the resulting cash flow works for your household. A pension contribution exchanges accessible income now for retirement savings. Before modelling a contribution, write down the cash needed for near-term bills, emergencies and planned purchases. Then compare the contribution with the change in take-home pay, rather than treating the tax reduction as money you can spend.

Your next three checks

1. Establish your full-year adjusted net income, including income outside your payslip.
2. Check pension limits and existing employer contributions before increasing payments.
3. Ask payroll when a salary-sacrifice change can take effect.

Our planner is an employment-only illustration. It does not establish childcare eligibility, your complete tax bill or your available pension allowance. If your situation includes shares, rental income or multiple pension schemes, take a full income summary to a qualified adviser.