A £10,000 bonus sounds like good news until the payslip arrives and roughly £6,200 of it has gone somewhere other than the bank account it was supposed to land in. That is the reality for anyone whose income for the year falls between £100,000 and £125,140 — a band HMRC does not label specially on any form, but which accountants have nicknamed the “60% trap” because that is close to what actually happens to the next pound earned. It is not a new tax rate written into the Income Tax Act. It is what happens when a pay rise or bonus quietly switches off the Personal Allowance, pound by pound, while the rest of the tax system carries on as if nothing has changed.
How the Personal Allowance taper actually works
Everyone starts the tax year with a £12,570 Personal Allowance — the slice of income taxed at 0%. Once adjusted net income passes £100,000, HMRC withdraws that allowance at £1 for every £2 earned above the threshold. Someone with adjusted net income of £110,000 has crossed the line by £10,000, so £5,000 of allowance disappears, leaving £7,570 tax-free instead of £12,570. Push adjusted net income to £125,140 or beyond and the allowance is gone entirely: £0. That figure, £125,140, is not a round number by accident — it is the exact point at which £12,570 of allowance has been fully clawed back at the £1-per-£2 rate, and it is also where the 45% additional rate begins.
The Personal Allowance, along with the basic rate limit and the additional rate threshold, has been frozen for several tax years running and is set to stay frozen until April 2028 under policy confirmed at the Autumn Statement. Wages have not stood still over the same period. That combination is precisely why more people fall into this band every year without their salary or bonus having grown by anything unusual — a modest pay rise or a decent annual bonus is often all it takes to cross £100,000 for the first time, sometimes by only a few hundred pounds.
Why the real marginal rate is 60p, not 40p
Take someone already paying higher-rate tax who earns an extra £100 inside this band. The £100 itself is taxed at 40%, costing £40. But because every £2 earned withdraws £1 of allowance, that extra £100 also drags £50 of previously tax-free income back into the taxable pile, and that £50 is taxed at 40% too — another £20. Total tax on the £100: £60. That is the 60% marginal rate the nickname refers to, and it applies whether the £100 comes from a pay rise, a bonus, rental profit, or dividend income, as long as adjusted net income sits inside the £100,000–£125,140 band. For salaried income specifically, it is worse still, because Employee National Insurance is charged at 2% on earnings above the Upper Earnings Limit of £50,270, and a salary or bonus in this band sits well above that limit. Add the 2% to the 60% income tax bite and a bonus paid through payroll in this range effectively loses 62p in every extra pound, not 60p. Rental income, dividends and savings interest do not carry a National Insurance charge, so the taper hits those forms of income at exactly 60% rather than 62%.
Here is the part most people do not expect: it gets better above £125,140, not worse. Once the Personal Allowance has been fully withdrawn, there is nothing left to claw back, so the marginal rate drops straight to the 45% additional rate. The band that actually hurts the most sits in the middle, not at the top of the income scale — a £140,000 earner keeps more of their next pound than someone stuck at £115,000.
The childcare cliff-edge that makes the trap sharper for parents
Working parents lose something else entirely at £100,000, and it is not tapered — it simply stops. Both the 30 hours of free childcare for three- and four-year-olds and Tax-Free Childcare require each parent's adjusted net income to stay under £100,000. Go £1 over and the whole entitlement disappears for that tax year, not just the portion above the threshold. Tax-Free Childcare alone is worth up to £2,000 a year per child, or £4,000 for a disabled child, and in London and the South East the free hours entitlement on top of that commonly outweighs even the Tax-Free Childcare top-up once nursery fees are factored in. A household where one parent earns £101,000 and the other earns £40,000 loses the lot, even though total household income is unremarkable for the area. A household where both parents earn £95,000 each keeps everything, despite a combined income nearly double the first family's. That asymmetry catches people out every renewal cycle, particularly anyone who has just had a pay rise or a one-off bonus land in the same tax year as a childcare eligibility check.
What actually counts as adjusted net income
This is the single most common misunderstanding in this whole area, and it is not take-home pay. Adjusted net income is total taxable income — salary, bonus, rental profit, dividends, savings interest, and the taxable value of benefits in kind such as a company car or private medical insurance reported on a P11D — minus gross pension contributions and Gift Aid donations grossed up for basic-rate tax. Someone earning a £105,000 salary who receives £8,000 of company car and fuel benefit has adjusted net income closer to £113,000 once that benefit is added, not £105,000, and the taper bites accordingly. If your P11D shows a company car, private medical insurance, or any other benefit in kind, add its taxable value on top of salary before assuming you are safely clear of £100,000.
Plenty of higher-rate taxpayers only discover they have tipped into the band when they complete Self Assessment the following January and see the Personal Allowance restriction applied on the calculation. By then the tax year the income relates to has already closed, and the main fix — a pension contribution against that year's income — is no longer available, because relief has to be claimed against the tax year the contribution was actually paid in.
Three ways to bring adjusted net income back under £100,000
None of these require anything exotic, and all of them are standard HMRC-recognised reliefs rather than avoidance schemes.
- Salary sacrifice into a pension. The sacrificed amount never appears as income in the first place, so it reduces adjusted net income pound for pound and also cuts the employer's National Insurance bill, some of which employers pass back as an extra pension contribution. The standard annual allowance for pension contributions is £60,000 for 2026/27, which gives most people in this income band plenty of headroom.
- Gift Aid donations. A basic-rate-grossed-up donation extends the basic rate band and reduces adjusted net income at the same time — useful for anyone who already gives to charity and would rather the reduction count towards the Personal Allowance taper as well.
- Timing bonus payments where the employer allows it, so a bonus lands in a tax year where other income is lower — this only works with the employer's cooperation and cannot be requested after the bonus has already been processed through payroll, so it needs raising well before the payment date, not after the payslip arrives.
Salary sacrifice into a pension is the better option for most people in this band, because it is the only one of the three that also builds retirement savings rather than simply reducing a tax bill. Do not bother redirecting a bonus into an ISA to try to fix this: ISA contributions come from money that has already been taxed, so they have no effect whatsoever on adjusted net income. A pension contribution, made before the money is taxed, is the only common vehicle that actually moves the number HMRC uses for the taper calculation.
One case where clawing back to £100,000 is not worth it
Someone whose income is already well past £125,140 gains nothing from a pension contribution sized to reach exactly £100,000 — there is no allowance left to protect at that point, so the contribution only buys standard 45% (or 40%, depending on how far it reduces income) higher-rate relief, the same relief available to any higher-rate taxpayer regardless of the taper. The targeted strategy only pays off for people whose income sits inside the £100,000–£125,140 band itself, where every pound of contribution is doing double duty: recovering lost allowance and attracting tax relief at the same time.
Getting the timing right before the tax year closes
The taper does not send a warning letter. It shows up quietly on the following year's tax calculation, by which point the window to fix the year it relates to has already shut. A pension contribution or Gift Aid donation has to clear before 5 April to count against that tax year's adjusted net income — anything paid on 6 April or later counts towards the next one instead, regardless of which bonus or pay rise it was meant to offset. If you expect your total income to land anywhere near £100,000 this year, check the figure in February or March, while there is still time to act, rather than waiting for the Self Assessment calculation to confirm it in January.