What is the £100k tax trap?
Everyone gets a £12,570 personal allowance, the part of your income that isn’t taxed. Once your adjusted net income goes over £100,000, you lose £1 of that allowance for every £2 you earn above it. By £125,140 it’s all gone.
So between £100,000 and £125,140, each extra £1 you earn costs you 40p in higher-rate tax and 20p because more of your income becomes taxable. That’s an effective rate of 60%, or 62% with National Insurance.
The thresholds are frozen until April 2031, so pay rises are pulling more people into the trap every year.
The childcare cliff edge
If you have young children, it can be worse. Tax-Free Childcare (up to £2,000 per child a year) and the 30 hours of funded childcare in England both stop if either parent has adjusted net income over £100,000. There’s no taper: £1 over can cost you thousands.
How pension contributions get you out
Pension contributions reduce your adjusted net income. Bring it back to £100,000 and you get your personal allowance and childcare help back.
- Salary sacrifice through work is the best route. Your salary goes down, so you save income tax and National Insurance. Some employers also add their own NI saving to your pension.
- A personal pension or SIPP works too. Your provider adds 20% and you claim the rest through Self Assessment. You don’t save National Insurance.
Earning over £100k?
A regulated financial adviser can help you plan contributions, carry-forward and your tax return.
Find a financial adviserWorked example
Sarah has two children at nursery and uses Tax-Free Childcare. She asks her employer to sacrifice £10,000 of salary into her pension.
| Take-home pay before | £72,357 |
|---|---|
| Take-home pay after | £68,557 |
| Cost to Sarah | £3,800 |
| Added to her pension | £10,000 |
| Tax-Free Childcare she gets back | £4,000 |
Sarah puts £10,000 into her pension and ends up £200 a year better off in cash, because the childcare help she regains is worth more than the drop in her pay.
What’s changing for salary sacrifice
From April 2029, only the first £2,000 a year of pension salary sacrifice will be free of National Insurance. Above that, you and your employer pay NI as normal. Income tax relief doesn’t change, so salary sacrifice will still get you out of the £100k trap.
Questions
What is adjusted net income?
Your total taxable income (salary, bonus, rental profit, interest and so on) minus pension contributions made through salary sacrifice or before tax, and minus the gross amount of any personal pension contributions and Gift Aid donations.
Does a bonus count?
Yes. A bonus can push you over £100,000. Many employers let you sacrifice some or all of a bonus into your pension before it’s paid.
Can I do this if I’m self-employed?
Yes, with a personal pension. Your provider adds 20% and you claim the rest on your tax return. Contributions are limited to your earnings and the £60,000 annual allowance.
Do you cover Scotland?
Not yet. The £100k taper is the same in Scotland, but income tax bands and rates are different, so the figures here would be wrong. This calculator uses the rates for England, Wales and Northern Ireland.
What does this calculator leave out?
Student loan repayments, the High Income Child Benefit Charge, the tapered annual allowance for very high earners, dividends and Scottish rates. It’s a guide, not tax advice.