There is a stretch of income in the UK where earning more money makes remarkably little difference to what reaches your bank account, and where a modest pay rise can genuinely leave a household worse off overall. It starts at £100,000 and runs to £125,140, and almost nobody is warned about it before they walk into it.
The short version: above £100,000 your personal allowance is withdrawn at £1 for every £2 you earn, so you are taxed on the new income and on income that used to be tax-free. The effective marginal rate in that band is 60% in England, Wales and Northern Ireland and 67.5% in Scotland — before National Insurance. If you also have young children, it is considerably worse than that, because two separate childcare schemes stop dead at exactly the same line.
Two tools for this one. Our pension tax relief calculator shows what a contribution is worth at your income — it is the only place on the site where you will see a relief rate of 60% or more, and it is not a rounding error. Our Tax-Free Childcare calculator shows what crossing the line costs a family with children in childcare.
What actually happens at £100,000
Everyone starts with a personal allowance — the slice of income taxed at 0%, currently £12,570. It is not means-tested at ordinary salaries. Above £100,000 of adjusted net income, it starts to disappear: you lose £1 of allowance for every £2 you earn over the line. By £125,140 it is gone completely.
Losing allowance means income that was previously untaxed becomes taxable, at your highest rate. So every extra £1 you earn in that band is taxed directly, and it also drags 50p of previously tax-free income into tax. That is where the famous 60% comes from — it is not a special rate anyone legislated for, it is an arithmetic consequence of withdrawing an allowance from people who are already paying 40%.
The 60% rate is not a typo
These are the marginal rates on income tax alone. National Insurance sits on top, adding 2% in this range.
| Salary | Rest of UK | Scotland |
|---|---|---|
| £60,000 | 40% | 42% |
| £99,000 | 40% | 45% |
| £100,000 – £125,140 | 60% | 67.5% |
| £130,000 | 45% | 48% |
Read the last two rows together, because that is the genuinely absurd part: the marginal rate in the trap is higher than the rate paid by people who earn considerably more. Cross £125,140 and your marginal rate falls. There is no other point in the system where earning more reduces the rate on your next pound.
Scotland’s version is worse
Scottish income tax rates are set by the Scottish Parliament and the advanced rate of 45% bites well before £100,000. Withdrawing the personal allowance on top of a 45% rate produces an effective 67.5%, or 69.5% once National Insurance is included. A Scottish taxpayer in the trap keeps under a third of their next pound.
A pay rise you might not want
Abstract percentages are easy to shrug at, so here is the same thing as cash. These are changes in actual annual take-home, after income tax and National Insurance.
| Pay rise | Rest of UK | Scotland |
|---|---|---|
| £99,000 → £101,000 (+£2,000) | keep £960 | keep £835 |
| £100,000 → £102,000 (+£2,000) | keep £760 | keep £610 |
| £99,000 → £104,000 (+£5,000) | keep £2,100 | keep £1,750 |
A £2,000 rise that hands you £760 is not a scandal on its own — £760 is still £760. The problem is what else is attached to that line.
If you have young children, it stops being about tax
Two childcare schemes use £100,000 of adjusted net income as a hard eligibility limit, and neither of them tapers.
- Tax-Free Childcare ends entirely. That is up to £2,000 a year per child, or £4,000 for a disabled child.
- The free childcare hours for working parents — up to 30 hours a week in England for children from 9 months to school age — also end. Scotland, Wales and Northern Ireland run their own schemes with their own rules.
Both tests apply per parent. If either one of you goes over, the household loses the lot, however little the other earns.
Now put that next to the table above. A parent moving from £100,000 to £102,000 gains £760 in take-home. If that costs the family its Tax-Free Childcare for two children, that is £4,000 gone. If it also costs 30 funded hours a week, price those against what your own nursery charges per hour and the gap is not close. The pay rise is real, and the household is meaningfully poorer.
This is the scenario worth checking before accepting a promotion, a bonus, or a bump in hours — not afterwards.
Why a cliff is worse than a high rate
A 60% marginal rate is painful but rational: you always keep something. A cliff edge is not rational. One pound of income takes away thousands of pounds of support, which means there is a stretch of gross salary where you are unambiguously worse off than someone earning less than you. The tax system mostly avoids designing this in. Childcare support does not.
What people do about it
The key word in all of the above is adjusted net income. The tests are not run on your salary. They are run on your taxable income after certain deductions — and the two that matter most are pension contributions and Gift Aid donations.
That is why the standard route back under the line is a pension contribution, and why the same contribution does unusually heavy lifting here. It attracts relief at the marginal rate and restores the personal allowance you were losing, which is exactly what produces the 60% and 67.5% relief figures. For a parent, it can also restore childcare support that a straightforward salary reading says has gone.
Whether any of that is sensible for you is a genuinely open question, and not one this page can answer. Money in a pension is money you cannot spend for a long time, and the right balance depends on your age, your plans and everything else going on in your finances. What we can say is that the arithmetic in this band is unusual enough to be worth looking at properly rather than assuming a pay rise is always straightforwardly good news. Our pension tax relief calculator will show you the figures for your own income; a regulated financial adviser can tell you what to do with them.
Where the trap ends
At £125,140 the personal allowance has gone completely, there is nothing further to withdraw, and the effective rate drops back to the headline additional rate — 45% in England, Wales and Northern Ireland, 48% in Scotland. The trap is a band, not a permanent state. It is roughly £25,000 wide, and a lot of people spend several years passing through it without ever being told it exists.
Frequently asked questions
Is 60% really the rate? It isn’t in any tax table.
It is not a legislated rate, which is why you will not find it listed. It is the effective outcome of paying 40% on new income while simultaneously losing tax-free allowance at £1 per £2. The money leaves your pay packet regardless of what the rate is called.
Does this apply to bonuses?
Yes. Adjusted net income counts your total taxable income for the year, so a bonus that pushes you over the line has the same effect as a salary rise, and it can push you over for one year only.
What counts towards adjusted net income?
Broadly your total taxable income — salary, bonus, taxable benefits in kind, rental profit, most savings and dividend income — less certain deductions, mainly pension contributions and Gift Aid. It is not the same as your salary, and for many people it is not the same as the figure on their payslip.
Is the childcare limit really a cliff edge?
Yes, for both Tax-Free Childcare and the working-parent free hours. There is no tapering and no partial award. One pound over and the entitlement ends.
My partner earns nothing. Does that help?
Not for the childcare tests. They apply to each parent individually, so one parent over £100,000 ends the household’s eligibility regardless of the other’s income.
Should I turn down a pay rise?
That is not a question anyone should answer for you from a web page, and we are not going to. What is worth doing is working out the full picture — tax, National Insurance and any childcare support at stake — before you decide, rather than discovering it in April.
Where to go from here
- Pension tax relief calculator — see the 60% (or 67.5%) relief rate on your own numbers
- Child Benefit calculator — the other adjusted-net-income charge, tapering between £60,000 and £80,000
- Tax-Free Childcare calculator — what the cliff edge costs a family with children in childcare
- Salary calculator — your real take-home at any salary, with Scottish rates
- How to claim higher-rate pension tax relief — the relief that does not arrive on its own
- All Spondoons calculators — every tool in one place, free and without sign-up
This is general information about how UK income tax and childcare eligibility interact, not financial advice, and not a recommendation to take or avoid any particular course of action. Figures are for the 2026/27 tax year, cover income tax and National Insurance only, and assume a standard tax code with no other income — your own position may differ. Rates and thresholds change at fiscal events. For advice tailored to your circumstances, speak to a regulated financial adviser; for free and impartial guidance, MoneyHelper is a good place to start. The underlying rules are on GOV.UK.
Last updated: July 2026