Losing your Personal Allowance above £100,000

Most people in the UK get a Personal Allowance of £12,570 a year, the slice of income on which no income tax is paid. Earn more than £100,000 and that allowance starts to shrink. For every £2 of income above the £100,000 line, £1 of allowance is taken away¹. By the time income reaches £125,140, the allowance has gone altogether and every pound is taxed².

The effect is a band of income, roughly between £100,000 and £125,140, where each extra pound is taxed at your normal rate and also drags allowance into the tax net. That combination produces an effective tax rate of 60% on income within the range³. It is not a separate tax; it is the ordinary rate plus the allowance being clawed back.

The taper is worked out on adjusted net income, not just salary, so pension income, rent, dividends and savings interest all count⁴. The £100,000 threshold has not moved with inflation, and the Personal Allowance is frozen at £12,570 from 2021 to 2022 through to 2030 to 2031, so more people cross into the taper each year without any real rise in living standards⁵.

How the Personal Allowance taper works: £1 lost for every £2 over £100,000

The rule is simple to state and awkward to live with. Those earning more than £100,000 see their Personal Allowance reduced by £1 for every £2 earned over £100,000¹. The reduction applies to income above the £100,000 limit, irrespective of date of birth, so age plays no part⁶.

Because the standard allowance is £12,570, it takes £25,140 of income above the threshold to wipe it out entirely. That is why the allowance disappears at £125,140: £100,000 plus twice £12,570². Between those two figures, every additional £2 of income costs £1 of allowance, and that £1 of allowance would otherwise have sheltered £1 of income from tax.

The taper is not a cliff edge at £100,000. Someone earning £101,000 does not lose the whole allowance; they lose £500 of it, leaving £12,070. The loss builds gradually, which is why the practical effect is felt most sharply in the middle of the band rather than at the moment the threshold is crossed.

Two figures are sometimes confused. The £100,000 figure is the income limit above which the allowance is reduced⁷. The £125,140 figure is where the allowance reaches zero². Both are stated in official guidance, and both matter: the first tells you when the taper starts, the second tells you when it stops.

Adjusted net income decides where the taper starts

The taper does not run on your salary alone. It runs on adjusted net income, and if that figure is above £100,000 your Personal Allowance is reduced by £1 for every £2 above it⁸. Adjusted net income is total taxable income after certain reliefs, which is why two people on the same salary can end up with different allowances.

What counts towards it is broader than many people expect. Pension income counts, and the taper applies to the money you get from your pension as well as to earnings⁴. Rental profit, dividends, savings interest and most other taxable income feed into the same total. A pay rise is the most obvious trigger, but a good year for a rental property or a large dividend can push someone over the line just as easily.

Reliefs that reduce adjusted net income can pull it back below the threshold. Pension contributions and Gift Aid donations are the two the guidance names, because they are deducted before the taper is worked out⁷. That is why the timing of a contribution can matter: paying into a pension can lower adjusted net income for the year and restore some or all of the allowance.

The practical point is that the taper is decided by a total, not by a single payslip. Anyone near £100,000 needs to look at all their income for the year, not just their employment income, before working out what allowance they will actually get.

No Personal Allowance above £125,140

You do not get a Personal Allowance if you earn over £125,140². At that point the taper has done its work and the allowance is zero. For tax years 2025/26 and 2026/27 the allowance is zero if income is £125,140 or above⁸.

Losing the allowance does not mean a different tax system applies. It means the first £12,570 of income, which would otherwise be tax-free, is taxed at your marginal rate along with everything else. For a higher rate taxpayer that is an extra slice of income taxed at the higher rate, on top of the tax already due.

Above £125,140 the position stabilises. There is no further allowance to lose, so the effective rate drops back to the ordinary marginal rate for the band you are in. The 60% effect is confined to the taper band; it does not continue indefinitely.

It is worth being precise about which figure applies to you. The £100,000 threshold is where the reduction begins⁷. The £125,140 figure is where it ends². Someone on £130,000 has no allowance at all, but they are no longer in the 60% band, because there is nothing left to withdraw.

The 60% effective tax rate between £100,000 and £125,140

This is the part that surprises people. Income between £100,000 and £125,140 can effectively be taxed at 60% once the taper is factored in³. The rate is not written into any tax table; it emerges from the interaction of the higher rate with the shrinking allowance.

The arithmetic is straightforward. Take £2 of extra income. At the higher rate, £2 attracts tax. At the same time, £1 of allowance is withdrawn, and that £1 of income, which would have been tax-free, now also attracts tax. The result is that £2 of income generates tax on £3 worth of income, which is where the 60% figure comes from⁹.

The band is narrow but the sums are not trivial. Over the full £25,140 range, the extra tax compared with a world without the taper is substantial, and it lands on people who would not necessarily describe themselves as wealthy. The Resolution Foundation has noted that the personal tax allowance is £500 lower than it would have been if thresholds were uprated with inflation¹⁰.

The 60% rate is not the only trap in this income range. The High Income Child Benefit Charge applies between £60,000 and £80,000, at 1% of Child Benefit for every £200 of income over £60,000¹¹. Someone with children can therefore face two separate clawbacks in the same broad income range, though they operate on different thresholds and different rules.

Frozen thresholds and more people caught by the taper

The £100,000 threshold has not been uprated with inflation, and the Personal Allowance has been frozen at £12,570 from 2021 to 2022 through to 2030 to 2031⁵. The income tax figures for England, Wales and Northern Ireland have been frozen until April 2028, and the freeze on income tax and National Insurance thresholds is set to end from April 2028, when thresholds are due to be uprated with inflation again¹².

Freezing a threshold while wages rise is a quiet way of raising tax. The Resolution Foundation calculated that, had the personal allowance not been frozen, it would be set to reach £16,660 by 2029-30¹³. The gap between that figure and £12,570 is the measure of the freeze.

The taper threshold has the same problem. Because £100,000 has not moved, each year a fresh group of people crosses it for the first time, not because they have become richer in real terms but because their pay has risen with inflation. The growth in tax liability among higher rate taxpayers is partly due to the tapering of the Personal Allowance¹⁴.

For anyone whose income sits near the line, the freeze makes planning harder. A pay rise that looks modest on paper can cost far more than expected once the allowance starts to disappear, and the effect compounds if the rise is repeated in later years.

Scottish and Welsh taxpayers: the same taper, different rates

The taper is UK-wide. Those earning more than £100,000 see their Personal Allowance reduced by £1 for every £2 earned over £100,000, and that applies in Scotland as much as anywhere else¹⁵. What differs is the rate applied to the income that remains taxable.

Scottish Income Tax has its own bands. For 2026 to 2027 the higher rate runs from £43,663 to £75,000 at 42%, the advanced rate from £75,001 to £125,140 at 45%, and the top rate is over £125,140 at 48%¹⁶. The Personal Allowance itself is the standard UK figure of £12,570, and it is reduced by £1 for every £2 of income over £100,000¹⁷.

That combination means a Scottish taxpayer in the taper band faces a higher marginal rate than someone elsewhere in the UK, and the allowance withdrawal sits on top of it. The 60% effective rate described above is a UK-wide consequence of the taper, but the underlying rate it is added to is set by the Scottish bands.

Wales operates its own rates too, though the taper rule is the same. The practical advice is the same in all four nations: work out adjusted net income, apply the £1 for £2 reduction, and then apply the rate that belongs to where you pay tax. The allowance mechanics do not change at the border; only the rate on the remaining income does.

Where the taper meets other allowances

The Personal Allowance is not the only allowance with a taper, and the interactions can catch people out. The Tapered Annual Allowance for pensions applies when adjusted income is over £260,000, provided the threshold income test is met¹⁸. That is a much higher trigger than the £100,000 Personal Allowance taper, but the two can overlap for very high earners.

The residence nil rate band for inheritance tax tapers too. If an estate is worth more than £2m, the extra allowance falls by £1 for each £2 above the threshold¹⁹. Again the trigger is different, but the pattern is familiar: an allowance that shrinks as income or value rises.

Marriage Allowance is affected in a different way. It lets a couple transfer up to £1,260 of Personal Allowance between them, and it is designed for couples where one partner earns below the Personal Allowance of £12,570²⁰. Once the higher earner's income passes £100,000, the taper reduces the allowance available, so there is less to transfer and eventually nothing.

The lesson across all of these is that allowances are not fixed entitlements. They are means-tested in various ways, and the thresholds are not always aligned. Anyone near one of these lines needs to look at the whole picture rather than a single figure.

Checking your tax code and getting help

If your income has crossed £100,000, your tax code should change to reflect the smaller allowance. You can check it online on GOV.UK or on the HMRC app, and let HMRC know if it still does not look right²¹. If you are a higher rate taxpayer you can also contact HMRC directly²².

A code that has not caught up with the taper is a common problem. It can mean too little tax is collected during the year, followed by an unwelcome bill later. Checking early, and telling HMRC about a change in income, is the simplest way to avoid that.

If you are unsure how the taper applies to your own income, free and impartial help is available. TaxAid offers advice to people on lower incomes who are struggling with tax problems⁴. MoneyHelper provides free guidance on tax and money matters. For anyone who believes HMRC has made a mistake, there is a formal complaints process and, beyond it, the Adjudicator's Office.