When a Pay Rise Pushes You Over GBP 100,000 in 2026/27

A pay rise is good news, until it pushes you across GBP 100,000. At that point the Personal Allowance starts to disappear, and a slice of your income is effectively taxed at around 60%. This case study works through what happens when a salary moves from GBP 100,000 to GBP 110,000 in 2026/27.

How the taper works

For 2026/27 the Personal Allowance is GBP 12,570. Once your adjusted net income passes GBP 100,000, you lose GBP 1 of allowance for every GBP 2 of income above that line. The allowance is fully gone at GBP 125,140.

Losing allowance means more of your income becomes taxable at the 40% higher rate. Combined with the 40% you already pay on the extra earnings, the effective marginal rate in the GBP 100,000 to GBP 125,140 band is about 60%.

Worked example: GBP 100,000 to GBP 110,000

Take a rest-of-UK taxpayer (England, Wales or Northern Ireland) who gets a GBP 10,000 rise.

At GBP 110,000, income is GBP 10,000 over the GBP 100,000 threshold, so the allowance is cut by GBP 10,000 / 2 = GBP 5,000. The remaining allowance is GBP 12,570 minus GBP 5,000 = GBP 7,570.

On the GBP 10,000 rise itself:

• The GBP 10,000 is taxed at the 40% higher rate: GBP 4,000.
• The GBP 5,000 of allowance lost is now also taxed at 40%: GBP 2,000.
• National Insurance on the extra GBP 10,000 is at the 2% rate (you are already above GBP 50,270): GBP 200.

Total deductions on the GBP 10,000 rise: GBP 4,000 + GBP 2,000 + GBP 200 = GBP 6,200.

Extra take-home: GBP 10,000 minus GBP 6,200 = GBP 3,800.

So a GBP 10,000 headline rise delivers under GBP 4,000 in your pocket, an effective deduction rate of 62%.

What you can do about it

The band is one of the few places where a pension contribution can earn outsized relief, because it both saves higher-rate tax and can restore lost allowance.

• A pension contribution reduces adjusted net income pound for pound.
• Bringing income back below GBP 100,000 restores the full allowance.
• The annual allowance is GBP 60,000 for 2026/27, though it can taper for very high earners.
• Gift Aid donations also reduce adjusted net income.

Worked the other way, paying GBP 10,000 into a pension from GBP 110,000 can be remarkably efficient because you avoid both the 40% tax and the allowance withdrawal on that slice.

Quick points to remember

• The trap sits only between GBP 100,000 and GBP 125,140.
• Above GBP 125,140 the effective rate falls back, as there is no allowance left to lose.
• Bonuses and benefits in kind count towards the GBP 100,000 line.
• The taper is UK-wide, including Scotland.

Before deciding what to do with a rise, model it in the CalcHub salary calculator and the pension contribution calculator, and confirm the current taper rules on gov.uk. This is general information, not financial advice.