By PayMetric Labs Research Desk
Short answer
The Personal Allowance taper withdraws £1 of your tax-free allowance for every £2 you earn above £100,000, creating an effective 60% tax rate on income between £100,000 and £125,140.
Everyone in the UK gets a standard Personal Allowance of £12,570 in 2026/27, the first slice of income you pay no Income Tax on. Once your income (technically "adjusted net income") passes £100,000, HMRC withdraws that allowance at a rate of £1 for every £2 you earn above the threshold. By £125,140, the allowance is gone entirely.
This creates a notorious effective 60% marginal rate zone: on income between £100,000 and £125,140, you pay the standard 40% higher rate Income Tax on that slice, plus you're also losing tax-free allowance at the same time, which works out to roughly 60% combined (before National Insurance).
The fix most tax advisers point to is pension contributions. Pension payments via salary sacrifice reduce your adjusted net income, so contributing enough to bring your income back under £100,000 restores your full Personal Allowance and avoids the taper zone entirely. This makes pension contributions unusually valuable for anyone earning in this exact band.
No, the taper is an Income Tax mechanism only. National Insurance is calculated separately and doesn't taper in the same way, though the combined effect of Income Tax and NI in this band is still higher than the bands either side of it.
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This glossary entry is for general information only and does not constitute financial, tax, or legal advice. Rates and thresholds shown reflect current published guidance and may change.
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