// Source citations for the factual claims in this guide (kept out of the // rendered tree: flow-level MDX comments break Next scroll-on-navigation). export const sources = [ "2026/27 tax figures from site/lib/tax/config.ts: personal allowance £12,570, taper starts at £100,000 adjusted net income (£1 lost per £2 over), allowance fully gone at £125,140, higher rate 40%, employee NI 2% above the £50,270 upper earnings limit, Scottish advanced rate 45%. Worked examples (62% marginal rate, £9,553 kept of the £25,140 band, £110,000 salary pension example) computed from these figures.", "Free childcare for working parents, verified 2026-06-12 at https://www.gov.uk/check-eligible-free-childcare-if-youre-working: 30 hours per week for 38 weeks of the year for children aged 9 months to 4 years (England), not eligible if 'you or your partner's expected adjusted net income (including any foreign income) is over £100,000 for the current tax year'.", "Tax-Free Childcare top-up (£2 added per £8 paid in, up to £2,000 per child per year, £4,000 if disabled), verified 2026-06-12 at https://www.gov.uk/tax-free-childcare; the £100,000 adjusted net income eligibility condition verified 2026-06-12 in the Childcare Payments (Eligibility) Regulations 2015 (SI 2015/448) regulation 15, https://www.legislation.gov.uk/uksi/2015/448/regulation/15.", "Self Assessment criteria verified 2026-06-12 at https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return (no PAYE income threshold in the current criteria). Threshold history verified 2026-06-12 at https://www.gov.uk/government/publications/employer-bulletin-july-2024/july-2024-issue-of-the-employer-bulletin: for 2023/24 the PAYE-only threshold moved from £100,000 to £150,000, and 'from the tax year 2024 to 2025 onwards, the income threshold to complete a tax return for PAYE-only taxpayers will be removed'.", "Adjusted net income definition (deduct grossed-up Gift Aid and grossed-up relief-at-source pension contributions from total taxable income) verified 2026-06-12 at https://www.gov.uk/guidance/adjusted-net-income. Higher-rate relief on relief-at-source contributions claimed via Self Assessment or HMRC's separate claim route, verified 2026-06-12 at https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief.", ];

Guide · 6 minute read · Updated 2 Jul 2026

What happens to my tax when I earn over £100k?

Three things at once: your personal allowance starts to disappear, creating a 60% effective tax rate up to £125,140; government childcare support can vanish overnight; and pension contributions suddenly become the most tax-efficient money you will ever put away.

The 60% trap between £100,000 and £125,140

Everyone gets a personal allowance, £12,570 of income taxed at 0% in 2026/27. Once your adjusted net income passes £100,000, you lose £1 of allowance for every £2 over the line, and at £125,140 it is gone completely.

That taper creates a hidden tax band. For each extra £100 you earn between £100,000 and £125,140, you pay £40 of higher-rate tax on the £100 itself, and you also lose £50 of allowance, which exposes another £50 of income to 40% tax, costing a further £20. Total: £60 of income tax on £100 of pay, a 60% effective rate. Add 2% employee National Insurance and you keep £38 of every £100. Across the whole £25,140 band, you take home roughly £9,550. Run your own salary through the take-home pay calculator to see the band bite in your numbers.

Scottish taxpayers have it worse: income in this range sits in the 45% advanced rate, so the same taper maths produces an effective rate around 67.5% before National Insurance.

It is adjusted net income that counts, not salary

The £100,000 test uses adjusted net income (ANI): all your taxable income (salary, bonus, taxable benefits like a company car or private medical, savings interest, dividends, rental profit) minus the grossed-up value of Gift Aid donations and personal pension contributions. Salary sacrifice reduces your pay before tax, so sacrificed amounts never enter the calculation at all.

This is why a £98,000 salary plus a £6,000 bonus and £1,000 of savings interest quietly puts you in the trap, and why a one-off bonus year can trigger everything in this guide even if your normal pay is below £100,000.

The childcare cliff at £100,000

Two schemes die at the same line, and unlike the taper, they die instantly rather than gradually.

First, the free childcare hours for working parents in England: 30 hours a week for 38 weeks of the year for children aged 9 months to 4 years. Second, Tax-Free Childcare, where the government adds £2 for every £8 you pay into a childcare account, up to £2,000 per child per year (£4,000 for a disabled child).

Both are lost if you or your partner expect adjusted net income over £100,000. It is a per-person test, not a household one: a sole earner on £101,000 loses everything, while two parents on £99,000 each (£198,000 household) keep it all. For a family with one or two children in nursery, going £1 over £100,000 can cost thousands of pounds a year, which means the effective marginal rate on that £1 is, absurdly, well over 100%. We unpack what the hours are really worth in our 30 hours free childcare guide.

Self Assessment: the rule changed recently

For years, earning over £100,000 through PAYE automatically meant filing a Self Assessment return. That is no longer true. The threshold rose to £150,000 for 2023/24, and from 2024/25 onwards HMRC removed the income threshold for PAYE-only taxpayers entirely.

You still need to file if you meet any other criterion: self-employment income over £1,000, untaxed income such as rent or significant dividends, capital gains to report, or if HMRC sends you a notice to file. And many high earners should want to file anyway, because if your pension scheme uses relief at source, only basic-rate relief is added automatically; the extra 20% or 25% you are owed is claimed through Self Assessment (or via HMRC's separate claim route if you do not file). Unclaimed higher-rate relief is one of the most common ways earners over £100k leave money behind.

Pensions: the escape hatch, with a worked example

Pension contributions reduce adjusted net income, so they can rebuild your allowance and re-qualify you for childcare support in one move.

Take a £110,000 salary. Your allowance is cut by £5,000 to £7,570, and you are £10,000 over the childcare cliff. Now make a £10,000 gross contribution to a relief-at-source pension: you pay in £8,000, your provider adds £2,000 basic-rate relief, and you claim another £2,000 higher-rate relief. Your ANI falls to £100,000, restoring the full £12,570 allowance and saving a further £2,000 in tax. Net result: £10,000 in your pension at a real cost of about £4,000, an effective 60% relief rate. Model your own amount with the pension contributions calculator.

Through salary sacrifice the sums are similar but cleaner: sacrificing £10,000 of pay in the trap band costs you only about £3,800 of take-home, since that money would have been taxed at 62%, and some employers add part of their own NI saving on top.

The honest trade-offs: the money is locked away until pension access age, annual allowance limits cap how much you can contribute with relief, and if you need the cash now for a mortgage or childcare bills, a theoretical 60% relief rate does not pay this month's invoice. The taper maths makes contributions unusually valuable here; it does not make them automatically right for you.

Common questions

Why am I paying 60% tax on income between £100k and £125,140?

Because the personal allowance tapers away at £1 for every £2 of adjusted net income over £100,000. Each £100 earned in that band costs £40 tax directly plus £20 from the £50 of allowance lost, so £60 in total, before 2% National Insurance. The allowance is fully gone at £125,140.

Do I lose free childcare hours if I earn over £100k?

Yes. If you or your partner expect adjusted net income over £100,000 for the tax year, you lose both the 30 free hours for working parents and Tax-Free Childcare. It is a cliff edge, not a taper, and it is tested per person, so one parent at £101,000 disqualifies the household while two parents on £99,000 each keep everything.

Do I have to do a Self Assessment tax return if I earn over £100,000?

Not just because of the income. The PAYE-only threshold (latterly £150,000) was removed from the 2024/25 tax year. You still need to file if you have untaxed income, self-employment, capital gains or another trigger, and you may want to file to claim higher-rate relief on relief-at-source pension contributions.

How much should I pay into my pension to get under £100k?

Enough gross contribution to bring your adjusted net income to £100,000 or below. On a £110,000 income that is £10,000 gross (£8,000 from you plus £2,000 basic-rate relief in a relief-at-source scheme). Because it restores your personal allowance, the real cost is about £4,000 for £10,000 of pension.

Does salary sacrifice reduce adjusted net income?

Yes. Sacrificed salary is deducted from your pay before tax, so it never counts towards adjusted net income. That makes it an effective way to stay under the £100,000 line for the personal allowance and childcare eligibility, and it saves employee National Insurance as well.

Guidance and education, not regulated financial advice.