UK Personal Allowance: How the High-Income Taper Actually Works

The taper above £100,000

Once your adjusted net income passes £100,000, you lose £1 of Personal Allowance for every £2 you earn above that threshold. By £125,140, the allowance is gone entirely — creating an effective marginal rate above 60% in that £100,000–£125,140 band.

The 60% comes from two effects at once: the extra income is taxed at 40%, and each extra £2 also removes £1 of allowance, which exposes another £1 to 40% tax, adding 20% on the extra income (40% + 20% = 60%).

What it costs in practice

Here is the income tax for someone with no deductions at four incomes:

• £100,000: £27,432 of income tax, with the full £12,570 allowance.
• £110,000: £33,432. An extra £10,000 of pay brings £6,000 more tax, a 60% effective rate, because the allowance has fallen to £7,570.
• £125,140: £42,516, with the allowance completely gone.
• £130,000: £44,703. Above £125,140 the extra income is taxed at 45%, so the effective rate falls back from 60%.

National Insurance is not included in these figures, and it adds further to what you keep or lose.

Pension contributions can reduce your adjusted net income

Because the taper is based on adjusted net income, increasing pension contributions (within your Annual Allowance) can bring your income back under £100,000 — restoring some or all of your Personal Allowance while also building your retirement pot.

Take the £110,000 earner. A £10,000 pension contribution brings adjusted net income back to £100,000, so the full £12,570 allowance returns and income tax falls from £33,432 to £27,432. The contribution saves £6,000 of tax: 60% relief on the money paid in, so the £10,000 really costs £4,000 in tax terms.

Bonuses and the £100,000 line

The taper catches people who are nowhere near £100,000 for most of the year. Take someone on £96,000 who receives an £8,000 bonus, taking the year to £104,000. Income tax rises from £25,832 to £29,832: £4,000 more tax on £8,000 more income, an effective rate of 50%, because £2,000 of Personal Allowance disappears along with the usual 40% tax.

If you are close to the line, it can be worth asking whether part of a bonus can go into your pension instead, since that reduces adjusted net income before the taper applies.

Common mistakes

The same few errors account for most surprises:

• Judging the £100,000 threshold by salary alone, when adjusted net income also includes bonuses, benefits, savings interest and other income.
• Assuming a pension contribution reduces tax at only 20% or 40%; inside the taper band the relief can be 60%.
• Forgetting that contributions are limited by your Annual Allowance, so very large payments may not all qualify for relief.
• Ignoring National Insurance, which our income tax figures do not include.

Gift Aid works the same way

Charitable donations made through Gift Aid also reduce adjusted net income, so a donation can restore allowance in the same way as a pension payment. In the calculator, enter the gross (grossed-up) donation amount for it to count properly.

Check where you land

Enter your income into the Taxolase calculator to see your exact Personal Allowance after any taper, your marginal rate, and whether a pension contribution would meaningfully help. The calculator takes pension contributions and Gift Aid into account when it works out how much allowance you keep. It treats reliefs as simple deductions, so the exact mechanics of relief at source or net pay are simplified.