The UK 100k Tax Trap by Salary — Effective Marginal Rate Analysis
Original analysis of the UK 60% tax trap caused by Personal Allowance taper between £100,000 and £125,140. Effective marginal-rate curve, salary-by-salary breakdown, and the additional bite from withdrawn tax-free childcare benefits.
Salary-by-salary marginal rate (England/Wales/NI)
Gross income
Band
Effective marginal rate
Composition
£99,000
Higher rate (no taper)
42%
40% IT + 2% NI
£100,000
Threshold reached
42%
Last £ before taper kicks in
£105,000
Inside taper
62%
40% IT + 2% NI + 20% PA loss = 62%
£110,000
Inside taper
62%
Same 62% effective
£115,000
Inside taper
62%
Same 62% effective
£120,000
Inside taper
62%
Same 62% effective
£125,140
PA fully withdrawn
47%
45% additional + 2% NI
£130,000
Above taper
47%
45% IT + 2% NI
Marginal rate excludes student loan repayments. Plan 2 borrowers add 9% above £29,385, which makes the 62% trap into a 71% trap — an even sharper cliff in the under-30s "graduate professional" cohort.
The childcare cliff at £100,001
Benefit
Annual value
Cut-off
Tax-Free Childcare
Up to £2,000/yr/child
Either parent earns £100k
30 hours free childcare (England)
~£7,500/yr value
Either parent earns £100k
Combined cliff at £100k for 2 children under 5
~£11,500/yr loss
Crossing £100,000 of ANI
The childcare losses are binary — they disappear at the £100,001 ANI mark even if your income exceeds the threshold by £1. Combined with the 62% income-tax taper, a £101,000 earner with two pre-school children can be materially worse off than a £99,999 earner.
Why this matters
The £100,000 taper was introduced in Finance Act 2009, applying from 2010-11. The threshold has not moved since. Indexed to ONS CPIH from April 2010 (89.9) to April 2026 (141.8), it would be around £157,730 in 2026-27. Instead, HMRC counts about 1.56 million UK taxpayers with total income of £100,000 or more in 2023-24. The combined freeze of the PA, taper start, higher-rate threshold and additional-rate threshold compresses progressive structure into a series of cliffs.
The pension-contribution exit is well-known to advisers but under-used by affected taxpayers. A £25,000 pension contribution from a £125,140 earner reduces ANI to £100,140 — restoring £12,500 of the £12,570 Personal Allowance, recovering £5,000 of tax, and the contribution itself enjoys 40% relief. Effective combined relief: ~60%. The block on this strategy is the £60,000 annual allowance (tapered down to £10,000 for incomes above £260,000) and individual cash-flow capacity.
When your adjusted net income exceeds £100,000, your £12,570 Personal Allowance is reduced by £1 for every £2 above. Each extra £1 of gross income loses 50p of allowance, which is then taxed at 40% — adding 20p of tax on top of the 40p already due on the £1. Combined with 2% employee NI, the effective marginal rate on income between £100,000 and £125,140 is 62%, often rounded to "60%".
What does the curve actually look like?
Below £100,000 you keep 58p of every extra £1 (after 40% income tax + 2% NI). Crossing £100,000, you keep 38p — a 20-point cliff that lasts until £125,140. From £125,140 to the additional-rate threshold and above, you keep 53p (45% income tax + 2% NI). The trap is purely a consequence of the PA taper introduced in 2010.
Does the trap affect Scottish taxpayers differently?
Yes, and more sharply. The PA taper is reserved (UK-wide) but Scottish income tax bands differ above the Personal Allowance. The whole £100,000–£125,140 taper zone sits inside Scotland's Advanced rate band (45%, running £75,000–£125,140), so every Scottish taxpayer inside the taper faces the Advanced rate: 45% income tax + 22.5% from the PA taper (half of the 45% rate, since each £1 earned also exposes 50p of previously tax-free PA to that rate) + 2% NI = 69.5% effective marginal — well above the 62% England/Wales/NI rate. Above £125,140, the Scottish Top rate (48%) plus 2% NI gives 50%, versus 47% (45% additional + 2% NI) elsewhere in the UK.
What's the easiest way out of the trap?
Pension contributions. Salary sacrifice or personal pension contributions reduce adjusted net income £-for-£. A £25,000 contribution from someone earning £125,140 brings ANI back to £100,140 — restoring almost all the Personal Allowance, recovering ~£5,000 of tax relief, and netting roughly 60% effective relief on the contribution. Gift Aid donations have the same effect.
What about the childcare cliff?
A separate but compounding cliff: above £100,000 ANI for either parent, the household loses Tax-Free Childcare (up to £2,000/yr/child) and 30 hours free childcare in England (worth roughly £7,500/yr per child under 5). Two pre-school children = roughly £11,500/year disappears at exactly £100,001 — a "binary" cliff that makes the marginal-rate calculation unhelpful at the threshold itself.
How many people are inside the trap?
HMRC Personal Incomes Statistics 2023-24 (Table 3.3) count about 878,000 UK taxpayers with total income between £100,000 and £150,000, and about 1.56 million with £100,000 or more. HMRC's income bands do not split at £125,140, and total income is not the same as adjusted net income, so neither figure is an exact count of the people inside the taper. The £100,000 taper threshold has not moved since 2010, and Autumn Budget 2025 extended the freeze of the surrounding income-tax thresholds to April 2031 — so this group keeps growing at least that far as bonuses, equity, and salary growth push more earners across the line.
Is there a simple chart of the effective marginal rate?
A simplified effective-rate curve from £99k to £130k (England/Wales/NI, no student loan): 42% → 42% → 62% → 62% → 62% → 62% → 47% → 47%. The 62% spike inside the taper is a 20-point jump from the 42% on either side. See the table on this page for salary-by-salary detail.
