What happens above £100,000?
For 2026/27, the standard Personal Allowance is £12,570. Once adjusted net income exceeds £100,000, the allowance falls by £1 for every £2 above the threshold. It is fully removed at £125,140.
This withdrawal creates an effective 60% marginal Income Tax rate on income in this range for someone paying the 40% higher rate. Each extra £2 is taxed at 40%, and also removes £1 of allowance that then becomes taxable at 40%. Employee National Insurance can apply as well.
Simple example
If adjusted net income rises from £100,000 to £101,000, £500 of Personal Allowance is lost. The £1,000 itself can create £400 of Income Tax, while taxing the newly exposed £500 can add another £200. That is £600 of Income Tax on the extra £1,000, before National Insurance.
How salary sacrifice can help
Under an effective pension salary sacrifice arrangement, the sacrificed pay is normally replaced by an employer pension contribution. As the sacrificed amount is no longer cash earnings, it can reduce taxable employment income and adjusted net income.
That means sacrificing enough to move through part or all of the taper zone may restore some Personal Allowance, lower Income Tax and increase pension saving. The right amount depends on your wider income, employer scheme, pension allowances and need for take-home pay.
Use adjusted net income, not salary alone
The £100,000 test is based on adjusted net income. This may include salary and bonus as well as taxable benefits, rental profit, savings interest, dividends and other taxable income. Some deductions and pension contributions can reduce it.
A salary of exactly £100,000 does not guarantee adjusted net income of £100,000. Equally, salary above the threshold does not tell you the sacrifice needed without considering other income and deductions.
Childcare can also be affected
Tax-Free Childcare and certain free childcare eligibility tests use a £100,000 adjusted net income limit for each partner. Bringing your own adjusted net income below the limit may help, but both partners and all other eligibility conditions must qualify.
Checks before changing your salary
- Confirm that your employer offers pension salary sacrifice and how it treats bonuses.
- Check your total pension input against the annual allowance, any tapered allowance and the Money Purchase Annual Allowance.
- Consider how lower contractual pay could affect statutory pay, borrowing or employment benefits.
- Include taxable income beyond salary when estimating adjusted net income.
- Remember that pension money is normally locked away until pension access rules allow withdrawal.
Official sources
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Adjusted net income
- GOV.UK: Tax-Free Childcare eligibility
- HMRC manual: Effective salary sacrifice
Coverage and analysis
The £100,000 threshold is receiving growing attention because its effects can extend beyond the Personal Allowance taper.
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Economics Observatory: Why do some people in the UK face marginal tax rates of over 60%?
An accessible explanation of how different tax and benefit thresholds can create unusually high marginal rates.
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Financial Times: The madness of the £100,000 childcare tax trap
Examines how losing childcare support can sharply change the financial effect of moving above £100,000 for some parents.
See what different levels could mean for you
Compare take-home pay, tax and pension input across the Personal Allowance taper zone.
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