£100,000 tax trap calculator

Everyone in the UK normally gets a tax-free personal allowance of £12,570 — the amount you can earn before paying any Income Tax at all. Once your "adjusted net income" (broadly, total taxable income before pension and Gift Aid relief) passes £100,000, that allowance shrinks by £1 for every £2 earned above the threshold. By £125,140, the full £12,570 has been withdrawn and the allowance is £0. Because the withdrawn allowance would otherwise have been tax-free, losing it and paying 40% higher-rate tax on your normal income at the same time combines to an effective marginal rate of 60% across that £25,140 band. Employees also pay 2% National Insurance above the Upper Earnings Limit, pushing the effective rate to 62%.

Take someone earning £110,000 — £10,000 into the trap. Half of that, £5,000, is lost from their personal allowance (capped at the full £12,570 once you reach £125,140). That £5,000 of income which would have been tax-free is instead taxed at 40%, an extra £2,000 in tax on top of the normal 40% already due on the £10,000 itself. In total they pay £6,000 tax on £10,000 of extra income — a 60% effective rate, even though no tax band on the statute book is actually set at 60%.

A personal pension contribution or an employer salary sacrifice arrangement reduces your adjusted net income pound for pound. Contribute enough to bring your adjusted net income back to £100,000 and your full personal allowance is restored — on top of the pension contribution getting standard tax relief. At 40% relief, a £10,000 pension contribution costs roughly £6,000 in real terms once the tax saved is accounted for, since the government effectively co-funds the rest. Gift Aid donations to charity work the same way, reducing adjusted net income by the grossed-up donation amount. Salary sacrifice for benefits like childcare vouchers or a company car can also help, since sacrificed salary never counts as income in the first place.

This tool estimates the taper using gross income as a simplified stand-in for adjusted net income — it doesn't account for existing pension contributions, Gift Aid, or other reliefs you may already be claiming, all of which would lower your real adjusted net income below your gross salary. It also doesn't model dividend income, benefits-in-kind, or Scottish/Welsh income tax rate differences. Use it to understand the shape of the trap, not as a substitute for a real tax calculation from HMRC or a qualified adviser.