The £100k tax trap explained with real numbers
A £10,000 pay rise from £100,000 to £110,000 can add just £3,800 to annual take-home pay. Here’s how the personal allowance taper creates that gap.
Examples assume one employee, salary only, standard employee NI, no pension contributions, student loan or other deductions. Scottish income tax differs.
Two effects on the same extra pound
Above £100,000 of adjusted net income, every extra £2 removes £1 of personal allowance. Once income reaches £125,140, the standard £12,570 allowance has gone. GOV.UK: tax bands and the allowance taper.
In this salary-only example, an extra £1,000 attracts £400 of higher-rate tax. It also removes £500 of allowance, exposing another £500 to 40% tax: £200 more. That is £600 of income tax on £1,000 of extra income—the effective 60% rate.
£1,000 extra pay − £600 tax − £20 NI = £380 kept
The 62% figure includes 2% employee National Insurance. It applies to the extra pay in this band, not your whole salary. GOV.UK: employee NI rates.
Above £125,140 there is no allowance left to lose. Additional-rate income tax is 45%; with 2% employee NI, the next pound of salary typically leaves 53p before other deductions.
Follow a £10,000 pay rise
The annual estimate, before adding any pension or childcare considerations.
| Annual figure | £100,000 salary | £110,000 salary |
|---|---|---|
| Gross salary | £100,000 | £110,000 |
| Personal allowance | £12,570 | £7,570 |
| Income tax | £27,432 | £33,432 |
| Employee NI | £4,011 | £4,211 |
| Take-home pay | £68,557 | £72,357 |
Of the extra £10,000, £6,000 goes to income tax and £200 to NI. You keep £3,800. Figures are rounded to whole pounds; NI is estimated annually, so payroll results can differ.
A pension changes the trade-off
At £110,000 salary, our model shows £10,000 of salary sacrifice bringing adjusted net income to £100,000. Compared with taking all the salary, take-home falls by £3,800 and £10,000 goes into the pension.
That is a choice between accessible pay and money set aside for retirement. The pension is not cash you can spend now. Salary sacrifice requires an arrangement with your employer; contribution limits and minimum wage requirements also matter. GOV.UK: salary sacrifice.
A personal pension uses a different relief mechanism and does not give the same employee NI saving. Choose the actual pension method in the calculator. GOV.UK: pension tax relief.
Explore the pension comparisonCheck the figure behind the threshold
The test uses adjusted net income, which may differ from salary. Bonuses, taxable benefits and savings interest can affect it, while qualifying pension contributions and Gift Aid can reduce it. GOV.UK: adjusted net income.
Childcare is a separate consideration. This worked example includes no childcare support or Child Benefit, so it is not a full household comparison.