The UK £100k Trap Is Worse Than the 60% Tax Band

In short: Above £100,000, the UK withdraws your tax-free Personal Allowance by £1 for every £2 earned, creating a 60% effective marginal rate between £100k and roughly £125k. For parents of young children, losing 30 free hours and tax-free childcare on top can push the true marginal rate above 100% — earning more leaves you worse off. See your band with the £100k tax trap calculator.

The 60% Band, Explained

Everyone gets a tax-free Personal Allowance. But once your adjusted income passes £100,000, that allowance tapers away — you lose £1 of it for every £2 you earn. So each extra £1 in this zone is taxed at the 40% higher rate and drags a slice of previously tax-free income into tax. The combined effect is an effective 60% on that band.

Between £100k and ~£125k, you keep only about 40p of every extra £1 you earn.

The Childcare Cliff on Top

Here's the part most articles miss. UK childcare support (the free hours and tax-free childcare top-up) is withdrawn entirely once either parent's adjusted income exceeds £100,000. This is a cliff, not a taper — cross the line by £1 and the whole benefit can disappear.

For a family using full-time childcare, nudging from £99,999 to £101,000 can cost more than the raise. See the true rate with the marginal vs effective tax calculator.

The Fix: Salary Sacrifice

The clean escape is to reduce your adjusted income below £100,000 — most commonly by increasing pension contributions via salary sacrifice. Because you're giving up income that would have been taxed at 60% (and would have cost you your childcare), sacrificing into your pension can be extraordinarily efficient: a large gross contribution costs surprisingly little net, and it pulls you back under the cliff. Model your take-home with the take-home salary calculator.

Common Mistakes

Only counting the 60% band.

The tax band alone is manageable. It's the childcare cliff stacked on top that creates the >100% zone — you have to model both together.

Turning down a raise entirely.

The answer is rarely "refuse the money" — it's "redirect it into your pension" so your adjusted income stays under the threshold while your total compensation still rises.

Your Next Decision

If your income is near £100k and you have young children, work out your real marginal rate before accepting extra pay, and size a pension contribution that keeps you under the cliff. Start with the £100k tax trap calculator.