Guide
The £100,000 trap
There is no 62% tax band in UK law. There is one in your payslip, it starts at exactly £100,000, and it is the highest marginal rate most people will ever face.
The personal allowance is £12,570 of tax-free income. Above £100,000 it is withdrawn at £1 for every £2 you earn, and it is gone entirely at £125,140. That withdrawal is the whole story.
Earn one more pound at £100,000 and two things happen. The pound itself is taxed at the higher rate, 40%. And you lose 50p of personal allowance, which means 50p that used to be tax-free is now taxed at 40% — another 20p. So the pound costs you 60p in income tax. Add 2% National Insurance and the rate on further pay is 62%.
It is not a band anyone voted for. It is an interaction between two rules that were written separately, and because it does not appear on any rate table, most people meet it by accident — usually the month a promotion or a bonus takes them past £100,000 and the extra money is much smaller than they expected.
What it costs, precisely
| Salary | Take-home | Gained over £100,000 | Rate on the next £100 |
|---|---|---|---|
| £100,000 | £68,557.40 | — | 62% |
| £105,000 | £70,457.40 | £1,900 of £5,000 | 62% |
| £110,000 | £72,357.40 | £3,800 of £10,000 | 62% |
| £115,000 | £74,257.40 | £5,700 of £15,000 | 62% |
| £120,000 | £76,157.40 | £7,600 of £20,000 | 62% |
| £125,140 | £78,110.60 | £9,553.20 of £25,140 | 47% |
| £130,000 | £80,686.40 | £12,129 of £30,000 | 47% |
| £140,000 | £85,986.40 | £17,429 of £40,000 | 47% |
A £25,140 rise from £100,000 to £125,140 adds £9,553.20 to your take-home — 38.0% of it.
A rise from £100,000 to £125,140 is £25,140 of gross pay. It adds £9,553.20 to what you actually receive. Your employer, meanwhile, pays £28,911 more for it.
The way out is the pension, and the arithmetic is unusually good
The allowance taper is measured on adjusted net income, and a pension contribution reduces it. So a contribution made in this band does two jobs: it gets tax relief at your marginal rate, and it restores the personal allowance it was destroying. That is why the effective relief here is 62% rather than 40%.
Concretely, at £110,000:
| No contribution | £10,000 sacrificed | |
|---|---|---|
| Personal allowance | £7,570 | £12,570 |
| Income tax | £33,432 | £27,432 |
| National Insurance | £4,210.60 | £4,010.60 |
| Take-home | £72,357.40 | £68,557.40 |
| In your pension | — | £10,000 |
| Take-home given up | — | £3,800 |
| Employer NI | £15,750 | £14,250 |
£10,000 goes into the pension and take-home falls by £3,800 — so the pension pot grows by £1 for every £0.38 of spending power given up. Outside this band the same trade is much worse.
The cliffs that are not in these numbers
£100,000 is also a threshold for things this calculation deliberately does not model, because they depend on household circumstances rather than salary:
- Free childcare in England stops entirely at £100,000. Not a taper — a cliff. One pound over and the 15 or 30 funded hours go, for both parents' purposes, worth thousands a year per child. For a family using them, the effective marginal rate on the pound that crosses £100,000 can exceed 100%: earning more genuinely leaves you worse off.
- Tax-Free Childcare has the same £100,000 cut-off and the same cliff shape.
- The High Income Child Benefit Charge claws back Child Benefit over a separate threshold, adding an effective rate that rises with the number of children.
These are not folded into the figures above because they would be wrong for most readers and authoritative-looking for all of them. But if you have young children and are near £100,000, they matter more than the tax does — and they make a pension contribution that brings adjusted net income under £100,000 worth far more than the 62% on this page suggests.
What to do about it, in order of how much it helps
The trap is unusual among tax problems in that it has a clean answer. Because the taper is tested on adjusted net income rather than gross pay, anything that reduces adjusted net income moves you back down the ramp — and inside the £100,000 to £125,140 band, every pound moved is relieved at 60%. A pension contribution is the obvious lever, and it is worth roughly twice what the same contribution is worth £20,000 lower down. Gift Aid donations work the same way. So does a salary sacrifice arrangement, which also saves the employer's National Insurance on the sacrificed amount.
The order that matters is: work out how far into the band you are, contribute at least that much if you can, and check the result against adjusted net income rather than gross. The last step catches the common mistake — a bonus, a benefit in kind, or savings interest can push adjusted net income over £100,000 even when the salary line on the payslip is comfortably under it.
Checking this against your own payslip
Everything above is arithmetic on published parameters, which means it can be checked rather than trusted — and the check is worth doing, because the most common reason a figure here differs from your payslip is not an error on either side. Four things account for nearly all of it.
A tax code that is not the standard one changes your allowance, and codes carrying an adjustment from an earlier year are common. A benefit in kind — a company car, private medical cover — is taxed through the code and does not appear as pay. A workplace pension deducted before tax reduces taxable pay, so your gross and your taxable figure are not the same number. And National Insurance is charged per pay period rather than annually, which is why a month containing a bonus takes proportionally more than the annual figures here imply, and why the year-end total still reconciles.
If none of those explains the gap, it may be an error on this side, and that is worth an email to corrections@taxwedge.com. Corrections are published with a date at /changes/ whether or not anyone else would have noticed.
Questions people actually ask
Why is the tax rate 62% at £100,000 when the top rate is 45%?
Because two rules interact. The pound is taxed at 40%, and it also removes 50p of personal allowance, so 50p that was tax-free becomes taxed at 40% — a further 20p. That is 60p of income tax on one pound, plus 2p of National Insurance. The 45% additional rate does not start until £125,140, by which point the allowance has gone and the marginal rate has fallen back to 47%.
Does the 62% band apply to my whole salary?
No. It applies only to income between £100,000 and £125,140. Everything below is taxed at the ordinary rates. At £110,000 the effective rate — total tax and NI over gross pay — is 34.2%, while the marginal rate is 62%.
Is it worth earning more than £100,000?
On income tax alone, yes: you keep 38% of it, which is less than before but still more than nothing. The honest complication is childcare. In England the funded hours stop dead at £100,000 rather than tapering, so a family using them can be genuinely worse off after a small rise past the threshold. A pension contribution that keeps adjusted net income below £100,000 is the standard answer.
What is adjusted net income?
Total taxable income less certain reliefs — most importantly pension contributions and Gift Aid donations. It is the figure the £100,000 taper is measured against, which is why a pension contribution can restore the allowance rather than merely getting relief on the amount contributed.