Key takeaways
How the personal allowance taper creates a 60% effective marginal rate
The UK personal allowance for 2026/27 is £12,570. This is the amount of income you can earn each year without paying income tax. For most UK taxpayers, it is a permanent fixture of their tax calculation.
For people earning above £100,000, it is not. HMRC removes the personal allowance at a rate of £1 for every £2 of income above £100,000. At £125,140, the personal allowance hits zero and does not go any lower. The withdrawal applies regardless of your income source: salary, bonus, rental income, and dividends all count toward the adjusted net income figure.
The trap arises because the income that used to be covered by the personal allowance is now taxable, on top of the regular income tax and National Insurance you already pay on new earnings. The combined effect looks like this for every £1 of gross income above £100,000:
Normal higher rate
Reduced NI rate above UEL
This is the extra bite
~52% effective marginal rate
vs £0.58 at £90,000 gross
The commonly cited "60% trap" figure includes scenarios where the PA income would have been taxed at 40% (if it falls in the higher rate band after the allowance shift), which can push the effective rate slightly higher. The 52% figure above is the most precisely calculated figure for most employees in this range. Either way, it is a dramatically worse position than the 42% rate just below £100,000.
UK take-home pay at key salary points: 2026/27
Single employee, standard tax code, no other income · highlighted rows = personal allowance taper zone
| Gross salary | Net take-home | You keep (vs prev £5K) |
|---|---|---|
| £95,000 | ~£65,700 | ~42% |
| £100,000 | ~£68,600 | ~42% |
| £105,000 | ~£70,600 | ~40% |
| £110,000 | ~£72,600 | ~40% |
| £115,000 | ~£74,600 | ~40% |
| £120,000 | ~£76,500 | ~40% |
| £125,140 | ~£78,500 | ~40% |
| £130,000 | ~£80,600 | ~53% |
Why this particularly affects senior UK tech professionals
The £100,000 to £125,140 salary band is precisely the range where a large portion of senior software engineers, engineering managers, data leads, and cybersecurity professionals in London land after 7-12 years of career progression. It is also the range where many tech professionals negotiate their first significant promotion into leadership, or receive their first substantial base salary uplift from a hyperscaler.
Consider what happens when a Staff Engineer on £95,000 is offered a promotion to Principal Engineer at £115,000. The gross raise is £20,000, which sounds transformative. After the 52% effective marginal rate on the £15,000 earned above £100,000 (and the 42% rate on the first £5,000 between £95,000 and £100,000), the net increase is approximately:
Gross raise
£20,000
£95K to £115K
Net gain per year
~£9,800
after tax and NI
Extra per month
~£817
in your account
£817 per month extra from a £20,000 gross raise is a genuinely meaningful improvement. But it is a far cry from the intuitive "£20,000 more" that the offer headline suggests, and many professionals are surprised when they actually see the monthly difference for the first time.
See exactly how much you keep from a raise in the taper zone
Enter your current salary and new salary or raise percentage to see the exact net gain, the percentage of your raise you keep, and how Revenue (HMRC) splits the pie. Works for any salary from £80K upwards.
Open Salary Increase CalculatorThe counterintuitive truth: earning above £125,140 is more tax-efficient than £105,000
Once your income exceeds £125,140, your personal allowance is fully withdrawn and the taper effect disappears. You move into the additional rate band, where income tax is 45% and National Insurance remains at 2%. Your effective marginal rate drops from approximately 52% back down to 47%.
This creates a genuine anomaly: if you are earning £112,000 and can negotiate a promotion to £130,000, the first £13,140 of that raise (from £112K to £125,140) delivers about 48p per extra pound. The next £4,860 (from £125,140 to £130,000) delivers 53p per pound. You actually keep more from the very top of the raise than from the middle of it. This is not intuitive, but it is mathematically correct.
The practical implication: if you are in the taper zone and negotiating a pay rise, the most valuable outcome is to push your total income above £125,140 in a single step. A raise that lands you at £110,000 gives you the same poor efficiency all year. A raise that clears £125,140 exits you from the trap entirely for anything above that threshold.
Using pension contributions to escape the trap
Salary sacrifice pension contributions are deducted before your adjusted net income is calculated for personal allowance purposes. This makes pension contributions in the taper zone extraordinarily tax-efficient.
Suppose your salary is £110,000. Your adjusted net income is £110,000. Your personal allowance is reduced to £7,570. If you make a £10,000 salary sacrifice pension contribution, your adjusted net income drops to £100,000. Your personal allowance is fully restored to £12,570. The £2,500 of restored allowance saves you approximately £500 in income tax. On top of that, the £10,000 pension contribution cost you only £4,800 in net take-home (52% effective rate in the taper zone), yet it added £10,000 to your pension.
The pension rule of thumb in the taper zone
If your salary is between £100,000 and £125,140 and your employer offers salary sacrifice, contributing enough to bring your adjusted net income to £100,000 or below is almost always the most efficient use of your marginal income. You restore the personal allowance, reduce your effective tax rate, and build long-term wealth simultaneously.
Does the 60% trap apply to contractors?
The personal allowance taper applies to any UK tax resident whose adjusted net income exceeds £100,000, regardless of employment status. For contractors operating through a personal limited company, the income they draw as salary and dividends both count toward adjusted net income.
However, contractors have more flexibility in how they structure their income. Drawing a low salary (typically around the NI secondary threshold of £9,100) and taking the remainder as dividends changes the effective marginal rate calculation, because dividends are taxed differently from employment income. Whether the taper still applies at the same rate depends on the contractor's specific salary/dividend split. If you are outside IR35 and earning above £100,000 equivalent, it is worth modelling the optimal salary/dividend combination with a contractor accountant.
For inside IR35 contractors, the rules are the same as permanent employees: you are taxed on employment income at the full PAYE rates and the taper applies in full.
See the inside vs outside IR35 guide for the full contractor tax picture.
Is your raise beating inflation?
Getting a raise in the taper zone means your net gain is already squeezed by the effective marginal rate. If UK CPI is running at 3-4%, the real purchasing power gain from that raise may be minimal. Use the inflation impact calculator to see whether your gross raise is actually moving you ahead in real terms, or just keeping pace with rising prices.
Frequently asked questions
What exactly is the UK 60% tax trap?
The 60% tax trap refers to the effective marginal rate faced by UK employees earning between £100,000 and £125,140. In this band, your personal allowance (the income you pay zero tax on) is reduced by £1 for every £2 earned above £100,000. The result is that you pay income tax and National Insurance on the additional gross income in the normal way, but you also lose the tax benefit of the personal allowance at the same time. The combined effect is an effective marginal rate of approximately 52-60% depending on how the PA taper impact is calculated, substantially higher than the 42% rate that applies just below £100,000 and the 47% additional rate that applies above £125,140.
Does the 60% trap still apply in 2026?
Yes. The personal allowance remains at £12,570 for 2026/27, unchanged since 2021/22. The taper threshold also remains at £100,000. With earnings growth pushing more senior professionals into this band, and with the threshold frozen in cash terms, the number of people affected by the trap continues to grow each year. HMRC refers to this as the personal allowance income limit, not a 'trap', but the financial mechanics are the same.
How does the personal allowance taper actually work?
For every £2 of income above £100,000, your personal allowance is reduced by £1. The personal allowance starts at £12,570. At £125,140 (which is £100,000 plus twice the personal allowance), the personal allowance reaches zero. Between £100,000 and £125,140, you are effectively paying tax both on the additional income (at 40% income tax plus 2% National Insurance) and on the portion of your personal allowance being removed (at 20%, since that income falls in the basic rate band when the PA is stripped away). The combined effect is an effective marginal rate of approximately 52% on each additional pound in this range.
Is it worth negotiating a pay rise that takes me into the £100k-£125k band?
Yes, still worth it. Even at a 52% effective marginal rate, you keep 48p of every extra pound, which is better than nothing. The reason some professionals are cautious about this band is the feeling of diminishing returns: you need a £10,000 gross raise to take home only £4,800 extra. The bigger concern is people who accept a salary in the £105,000-£115,000 range thinking they are 'past' the high-tax zone, without realising they are in the worst efficiency band. If you are negotiating, try to push your total comp above £125,140 if at all possible, to exit the taper zone entirely.
Can I use pension contributions to escape the 60% trap?
Yes, salary sacrifice pension contributions are one of the most effective tools for reducing exposure to the personal allowance taper. Because pension contributions reduce your adjusted net income (the figure used to calculate the taper), contributing enough to bring your adjusted net income below £100,000 restores your full personal allowance. At a 52% effective marginal rate, the tax efficiency of pension contributions in this band is extremely high. A £10,000 pension contribution effectively costs you only £4,800 in net take-home, while adding £10,000 to your pension pot and restoring some or all of your personal allowance.
Does this trap also affect people who get a bonus that takes them over £100k?
Yes. The personal allowance taper applies to your total adjusted net income for the tax year, which includes bonuses. If your base salary is £90,000 and you receive a £15,000 bonus, your total income of £105,000 puts you in the taper zone for that tax year. The £5,000 above £100,000 triggers a £2,500 PA reduction. HMRC will adjust your tax code, or you may face an unexpected tax bill via self-assessment. Professionals who receive variable bonuses should model their expected total income for the year before assuming they are clear of the taper.
Does the personal allowance trap apply in Ireland?
No. Ireland does not have a personal allowance taper. Irish tax credits (the functional equivalent of the personal allowance) are fixed and do not reduce as income rises. However, Ireland's marginal rate above €44,000 is 52% for most employees, which is already in the range of what the UK taper produces in its worst band. For a cross-border comparison of marginal rates and net take-home, the Ireland vs UK take-home calculators give side-by-side figures.
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