The 60% Tax Band Between £100,000 and £125,140: How the Personal Allowance Taper Works

How the taper works

Everyone in the UK starts the 2026 to 2027 tax year, which runs from 6 April 2026 to 5 April 2027, with a standard Personal Allowance of £12,570, the slice of income on which no Income Tax is due. According to GOV.UK's Income Tax rates page, that allowance "goes down by £1 for every £2 that your adjusted net income is above £100,000," which means it reaches zero once income is £125,140 or more. In England, Wales and Northern Ireland the bands for the year are 20 percent on taxable income from £12,571 to £50,270, 40 percent from £50,271 to £125,140, and 45 percent above £125,140.

The 60 percent figure comes from two things happening to the same pound. Take an extra £2 of salary inside the band. The £2 itself is taxed at the higher rate of 40 percent, which is £0.80. At the same time £1 of the Personal Allowance disappears, so £1 of income that used to be tax-free is now taxed at 40 percent as well, which is another £0.40. That is £1.20 of tax on £2 of income, a marginal rate of 60 percent. Nothing on the tax return is labelled 60 percent; the rate is a by-product of the higher rate and the allowance withdrawal running over the same £25,140 stretch of income.

Payroll deductions sit on top. Employees in National Insurance category A pay 2 percent on earnings above £967 a week (£4,189 a month) in 2026 to 2027, per the GOV.UK National Insurance rates table, so the combined rate on salary becomes 62 percent. Graduates repaying a Plan 2 student loan pay a further 9 percent of income above £29,385, according to the Student Loans repayment guide, which brings the combined rate to 71 percent. Once income passes £125,140 the allowance is already gone, so the marginal rate falls back to the 45 percent additional rate, 47 percent with National Insurance. The band just below the additional rate is taxed more heavily at the margin than the additional rate itself.

Income band (2026-27)	Income Tax	Employee NI	Combined	With Plan 2 loan
£12,571 to £29,385	20%	8%	28%	28%
£29,386 to £50,270	20%	8%	28%	37%
£50,271 to £100,000	40%	2%	42%	51%
£100,001 to £125,140	60%	2%	62%	71%
Above £125,140	45%	2%	47%	56%

Marginal rates on employment income in England, Wales and Northern Ireland, category A National Insurance, no other income. The High Income Child Benefit Charge, which applies between £60,000 and £80,000 for families claiming Child Benefit, is left out. Scottish rates differ and are covered below.

Take-home pay across the band

The table below runs a single salary through the 2026 to 2027 rules in £5,000 steps. It uses the standard allowance, the England, Wales and Northern Ireland bands, category A National Insurance on annual thresholds of £12,570 and £50,270 (the annual equivalents of the monthly figures in the GOV.UK table, so payroll can differ by a few pounds), and no other income.

Salary	Personal Allowance	Income Tax	Employee NI	Take-home	Take-home, Plan 2 loan
£100,000	£12,570	£27,432	£4,011	£68,557	£62,202
£105,000	£10,070	£30,432	£4,111	£70,457	£63,652
£110,000	£7,570	£33,432	£4,211	£72,357	£65,102
£115,000	£5,070	£36,432	£4,311	£74,257	£66,552
£120,000	£2,570	£39,432	£4,411	£76,157	£68,002
£125,140	£0	£42,516	£4,513	£78,111	£69,493
£130,000	£0	£44,703	£4,611	£80,686	£71,631

Between £100,000 and £125,140, gross pay rises by £25,140 and take-home pay rises by £9,554, or 38 pence in the pound. With a Plan 2 loan the rise is £7,291, or 29 pence in the pound. Every £5,000 step inside the band adds £3,000 of Income Tax, against £2,000 in the steps just below £100,000. Take-home pay never falls as salary rises, so this is not a cliff in the strict sense. It is a band in which a pay rise buys much less than it appears to on an offer letter.

Adjusted net income, not salary, sets the taper

The taper is measured on adjusted net income, which is broader than salary in some ways and narrower in others. HMRC's adjusted net income guidance starts from total taxable income: employment pay including benefits in kind, self-employed profits, most pensions, savings interest, dividends, some rental income and income from a trust. A £90,000 salary with a £12,000 bonus, or a £95,000 salary with £6,000 of rental profit, both land inside the band even though neither salary does.

Three kinds of payment come off. Pension contributions paid gross, before tax relief, are deducted in full. Gift Aid donations are deducted at their grossed-up value, so each £1 donated takes £1.25 off. Contributions to a relief-at-source pension, where the provider adds basic-rate relief, are deducted the same way, £1.25 for each £1 paid. The same measure also decides the High Income Child Benefit Charge, which takes back 1 percent of Child Benefit for every £200 above £60,000 and all of it at £80,000, so anyone in the taper band who claims Child Benefit is already repaying all of it.

Pension contributions: salary sacrifice versus relief at source

Because pension contributions reduce adjusted net income, they can pull income back below £100,000 and restore the allowance. How much that costs depends on how the contribution is made. Consider a salary of £115,000 in England and a £15,000 pension contribution, the amount that brings adjusted net income back to exactly £100,000, made three ways.

Route	Into pension	Adjusted net income	Income Tax	Employee NI	Take-home	Cost to take-home
No contribution	£0	£115,000	£36,432	£4,311	£74,257	–
Salary sacrifice of £15,000	£15,000	£100,000	£27,432	£4,011	£68,557	£5,700
Relief at source, £12,000 paid	£15,000	£100,000	£30,432	£4,311	£68,257	£6,000

The relief-at-source row shows Income Tax after the higher-rate claim; the provider's £3,000 basic-rate top-up is paid into the pension. Take-home for that row is salary less tax, NI and the £12,000 paid in.

Salary sacrifice changes the employment contract so that the employee gives up £15,000 of pay and the employer pays £15,000 into the pension instead. HMRC's salary sacrifice guidance for employers gives the example of a £5,000 bonus exchanged for a £5,000 employer contribution with "no employment income tax or National Insurance contributions charge to the employee." Pay falls to £100,000, the full allowance returns, Income Tax drops by £9,000 and employee National Insurance by £300, so the £15,000 contribution costs £5,700 of take-home pay. Because student loan repayments are worked out on pay before deductions, a Plan 2 borrower also repays £1,350 less, and the cost falls to £4,350. The employer saves its own National Insurance on the £15,000 too, 15 percent in 2026 to 2027, or £2,250; whether any of that is passed into the pension depends on the employer. The guidance also notes that a sacrifice cannot take cash pay below the National Minimum Wage.

Relief at source is how most personal pensions and SIPPs work. The saver pays £12,000 from taxed income and the provider claims £3,000 of basic-rate relief from HMRC, so £15,000 reaches the pension. The grossed-up £15,000 reduces adjusted net income to £100,000, but the remaining relief is not automatic. According to GOV.UK's pension tax relief page, higher-rate taxpayers claim the extra relief through a Self Assessment return, or by contacting HMRC if they do not file one. In this example the claim is worth £6,000: £3,000 of extra higher-rate relief and £3,000 from the restored allowance. Net of that claim, the contribution costs £6,000, which is £300 more than salary sacrifice because no National Insurance is saved and, for a borrower, £1,650 more because the student loan repayment is unchanged. A workplace scheme that deducts contributions from pay before tax (a net pay arrangement) lands in the same place as relief at source on tax and National Insurance, without the need to claim.

Either way, £15,000 goes into a pension for well under half its face value. The trade-off is access: the money stays in the pension until the scheme's minimum pension age, and pension income is taxable when it is drawn.

The April 2029 change to salary sacrifice

The comparison above will shift from 6 April 2029. HMRC's tax information and impact note, published in December 2025, says that salary or bonus sacrificed into a pension above a £2,000 limit for the tax year will attract employee and employer Class 1 National Insurance. Income Tax relief is unchanged, and so is the effect on adjusted net income: the note states that "this measure will not change the impact of salary sacrifice on adjusted net income" and names the Personal Allowance taper and Tax-Free Childcare as examples. HMRC estimates that 3.3 million of the 7.7 million employees who use salary sacrifice for pensions sacrifice more than £2,000.

For the £115,000 earner, the first £2,000 of the £15,000 sacrifice would stay free of National Insurance and the other £13,000 would not. At today's 2 percent employee rate that is £260 a year, lifting the cost from £5,700 to £5,960, still below the £6,000 relief-at-source cost. The employer's side, at today's 15 percent, would be £1,950. National Insurance rates for 2029 to 2030 have not been set, and the note says the detailed design of the £2,000 limit will follow in secondary legislation, so these figures show the shape of the change rather than a forecast.

The childcare cliff at the same line

For parents, the £100,000 line matters for more than the allowance. Tax-Free Childcare adds £2 for every £8 paid into a childcare account, up to £2,000 a year per child (£4,000 for a disabled child), and a family cannot claim it if either partner's expected adjusted net income is over £100,000 for the tax year. The free childcare for working parents scheme in England, up to 30 hours a week for 38 weeks a year, uses the same test.

Unlike the allowance, these are cliffs rather than tapers. An adjusted net income of £100,001 removes the whole year's Tax-Free Childcare, so a family with two eligible children loses up to £4,000 of top-ups for £1 of extra income, on top of whatever the free hours are worth to them. The test is applied to each partner separately, so a couple on £95,000 each keeps both schemes while a couple on £105,000 and £40,000 does not. A pension contribution that keeps adjusted net income at or below £100,000 protects both, which is why a small contribution just above the line can be worth more than its tax relief suggests.

Scotland

The Personal Allowance and its taper are set UK-wide, but Scottish taxpayers pay Scottish Income Tax on earnings. For 2026 to 2027 the Scottish bands include a 42 percent higher rate from £43,663, a 45 percent advanced rate from £75,001 to £125,140, and a 48 percent top rate above £125,140. Inside the taper, each extra £2 is taxed at 45 percent and removes £1 of allowance that is then also taxed at 45 percent, a marginal rate of 67.5 percent, or 69.5 percent with National Insurance and 78.5 percent with a Plan 2 loan as well.

On the same assumptions as the table above, a Scottish salary of £100,000 leaves £65,257 of take-home pay and £125,140 leaves £72,925, a rise of £7,668, or about 30.5 pence in the pound. A £15,000 salary sacrifice at £115,000 costs £4,575 of take-home pay in Scotland. For relief-at-source contributions, providers claim 20 percent and Scottish taxpayers claim the difference above that through Self Assessment, using the rates set out on the GOV.UK pension tax relief page.

Limits on the pension route

Contributions count against the pension annual allowance, which is £60,000 for 2026 to 2027 and includes employer contributions and salary sacrifice. Unused allowance from the previous three tax years can be carried forward. The allowance is tapered only when threshold income is over £200,000 and adjusted income is over £260,000, so it rarely binds for someone whose income sits in the £100,000 to £125,140 band. Tax relief on personal contributions is also capped at 100 percent of relevant earnings, which matters when much of the income is dividends or rent rather than pay.

Frequently asked questions

Why is the marginal tax rate 60% between £100,000 and £125,140?

Each extra £2 of income is taxed at the 40 percent higher rate, and it also removes £1 of the £12,570 Personal Allowance, so £1 of income that was tax-free becomes taxable at 40 percent. That is £1.20 of tax on £2, or 60 percent. The allowance is gone at £125,140, after which the marginal rate drops to the 45 percent additional rate. Employee National Insurance of 2 percent and, for Plan 2 borrowers, a 9 percent student loan repayment sit on top.

Does a pension contribution restore the Personal Allowance?

Yes, if it brings adjusted net income back towards £100,000. A salary sacrifice lowers pay directly, so the allowance is restored through payroll. A relief-at-source contribution is deducted from adjusted net income at its grossed-up value, £1.25 for each £1 paid, but the higher-rate relief and the restored allowance are claimed through Self Assessment. For a £115,000 salary, a £15,000 contribution costs £5,700 of take-home pay through salary sacrifice and £6,000 through relief at source in 2026 to 2027.

What changes for salary sacrifice in April 2029?

From 6 April 2029, pay or bonus sacrificed into a pension above £2,000 a year will attract employee and employer National Insurance. Income Tax relief does not change, and HMRC's impact note says the effect on adjusted net income does not change either, so salary sacrifice will still restore the allowance. At today's 2 percent employee rate, a £15,000 sacrifice would cost £260 more a year in National Insurance.

Is the rate different in Scotland?

Yes. The taper is the same, but earnings in the band are taxed at the Scottish advanced rate of 45 percent, so the marginal Income Tax rate inside the band is 67.5 percent, or 69.5 percent with employee National Insurance. Above £125,140 the Scottish top rate is 48 percent.

What else is lost when adjusted net income passes £100,000?

Tax-Free Childcare, worth up to £2,000 a year per child, and the free childcare for working parents scheme in England both stop if either partner's expected adjusted net income is over £100,000. Unlike the allowance taper, these stop in full at £100,001, so the first pound over the line can cost more than any tax on it.

Related on this site: the ISA versus SIPP guide compares pension relief with tax-free saving outside a pension.

Sources

• GOV.UK, Income Tax rates and Personal Allowances (2026 to 2027)
• HMRC, Personal Allowances: adjusted net income
• GOV.UK, National Insurance rates and categories (2026 to 2027)
• GOV.UK, Repaying your student loan: how much you repay
• HMRC, Salary sacrifice for employers
• HMRC, Salary sacrifice reform for pension contributions effective from 6 April 2029 (December 2025)
• GOV.UK, Tax on your private pension contributions: tax relief and annual allowance
• GOV.UK, Tax-Free Childcare and Free childcare if you're working
• GOV.UK, Income Tax in Scotland (2026 to 2027)