Published: June 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 HMRC tax year. All calculations and tax rules have been audited against official UK legislation.
Earning £100,000 is a major milestone in the UK, but it triggers one of the most penalizing tax zones in the tax code: the 60% effective marginal tax rate. Understanding how this trap works and how to legally bypass it is essential for high earners in the 2026/27 tax year.
Why is there a 60% tax trap?
Once your adjusted net income exceeds £100,000, your tax-free Personal Allowance of £12,570 is reduced by £1 for every £2 of income above this limit. This taper effect means that for every £100 you earn between £100,000 and £125,140, you pay £40 in Higher Rate income tax and lose £50 of your tax-free allowance (which incurs an extra £20 of tax). This creates an effective tax rate of 60% on this band, before National Insurance is even calculated!
How to legally avoid the 60% tax trap
The most effective strategy is to reduce your adjusted net income back to £100,000 by making pre-tax pension contributions or donating to charity. By using salary sacrifice schemes or contributing to a SIPP, you save up to 60% tax on your contributions while keeping your full Personal Allowance. Check your potential savings using our Salary Sacrifice Calculator or model your retirement projections with our Pension Growth Calculator.
Frequently Asked Questions (FAQ)
Q: What is the £100k tax trap?
A: It is the 60% effective tax rate applied to earnings between £100,000 and £125,140, caused by the tapering off of the standard Personal Allowance of £12,570.
Q: Can I use pension contributions to avoid the tax trap?
A: Yes, making a contribution to a registered pension plan lowers your adjusted net income, allowing you to reclaim your personal allowance and save up to 60% in tax.
Q: Does the tax trap affect childcare hours?
A: Yes, if your adjusted net income exceeds £100,000 by even £1, you lose access to tax-free childcare and the 30 free hours childcare scheme, making the effective cost of earning over £100k even higher.