The £100,000 tax trap

Once your adjusted net income goes over £100,000, you lose £1 of your £12,570 Personal Allowance for every £2 above that line. The allowance is gone completely at £125,140. In that range every extra £100 of income is taxed at 40 per cent and also turns £50 of previously tax-free income into taxable income, so the effective rate is 60 per cent, or 62 per cent once National Insurance at 2 per cent is added. In Scotland it is higher still.

Who it affects in the public sector

A salary does not have to be £100,000 for this to bite, because adjusted net income includes other taxable income such as overtime, extra sessions, rental income and savings interest. Within the public sector, pay at this level includes:

Role (England, 2026/27)	Basic pay
NHS band 8d	£94,356 to £108,814
NHS band 9	£112,782 to £129,783
Consultant (2003 contract)	£113,565 to £150,569
Leadership group (teachers, outside London)	up to £148,829

Many band 8d and band 9 managers and most consultants are inside the taper. A band 8d manager at the bottom of the band can also be pushed into it by additional duties or an extra role. Our guide to NHS band 9 has the full band and our doctors’ pay page covers consultants.

How the 60 per cent is worked out

Take someone in England with £110,000 of adjusted net income. That is £10,000 above £100,000, so they lose half of that, £5,000, from their Personal Allowance. Their allowance falls from £12,570 to £7,570.

Compared with someone on exactly £100,000, the person on £110,000 pays:

• 40 per cent on the extra £10,000 of income, which is £4,000
• 40 per cent on the £5,000 of income that is no longer covered by the allowance, which is £2,000

So £6,000 extra tax on £10,000 extra income: 60 per cent. Add 2 per cent National Insurance and the person keeps £3,800 of the £10,000.

Above £125,140 the allowance is gone and the rate drops to the 45 per cent additional rate, plus 2 per cent NI.

Scotland

Scottish taxpayers lose their allowance in the same way, but income in that range is taxed at the advanced rate of 45 per cent. Each £1 of lost allowance is also taxed at 45 per cent, which gives an effective rate of 67.5 per cent, or 69.5 per cent with NI. Above £125,140 the Scottish top rate of 48 per cent applies. Gov.scot says the higher, advanced and top thresholds stay frozen until 2028-29.

Childcare support lost at £100,000

The £100,000 line also matters for parents, and here the effect is a cliff edge rather than a taper. If either parent has adjusted net income over £100,000 in England:

• the family cannot get Tax-Free Childcare, which adds £2 for every £8 paid in, up to £2,000 a year per child or £4,000 for a disabled child
• the family cannot get the 30 hours of funded childcare for working parents

A single pound over the limit can lose thousands of pounds of support. Universal 15 hours for 3 and 4 year olds is not income-tested. There is more in our guides to Tax-Free Childcare and funded childcare hours.

Above £80,000 of adjusted net income, Child Benefit is also fully repaid through the High Income Child Benefit Charge, so families in this range have usually lost that already.

How adjusted net income is reduced

Adjusted net income is your total taxable income minus certain deductions. The ones that most often matter for public sector staff are:

• pension contributions through a net pay scheme, such as the NHS Pension Scheme, which come off before tax
• personal pension contributions made through relief at source, grossed up
• Gift Aid donations, grossed up
• payroll giving, which comes off taxable pay

A consultant in the NHS Pension Scheme earning £113,565 pays 12.5 per cent of pensionable pay, about £14,196. Their taxable pay from that job is around £99,369, so they may be under £100,000 even on a salary above it. Extra private work, waiting list initiative sessions or a clinical excellence award can then take them back over.

Higher pension contributions can bring adjusted net income down, but they can also raise questions about the annual allowance for pension savings. The pension annual allowance guide explains that limit. Whether to change pension contributions is a personal financial decision; a regulated financial adviser or your scheme’s administrator can explain the effect on your benefits.

Checking where you are

Your P60 shows your taxable pay from each job for the year, and your tax code shows whether HMRC has already reduced your allowance. A code well below 1257L, or a K code, can be a sign the taper has been applied. Our personal allowance guide explains how the allowance appears in your code. If your income is near the line, HMRC may need you to file Self Assessment so the right allowance is used.