£100,000 vs £120,000 Salary — What’s the Real Difference?

What the Move Actually Delivers

Moving from £100,000 to £120,000 is a gross increase of £20,000. But after income tax and National Insurance you actually take home £7,600 more per year — that’s £633 extra per month. You keep 38% of the rise under 2025/26 rules (thresholds frozen to 2028); because those thresholds are frozen, the same figures apply for 2026/27.

Every pound of this rise lands inside the £100,000–£125,140 personal allowance taper. From £100,000 you lose £1 of tax-free allowance for every £2 you earn — at £120,000 your allowance is down to £2,570 — which stacks roughly 20 percentage points on top of 40% higher-rate tax and 2% National Insurance. The effective marginal rate across the whole rise is about 62%, so you keep roughly 38p of every £1: the worst marginal zone anywhere in the UK income tax system, and exactly why the kept share above is 38%. Push past £125,140 and the marginal rate actually falls back to 47%.

For context, £100,000 is about 2.6× and £120,000 about 3.1× the UK median full-time salary of £39,039 (ONS Annual Survey of Hours and Earnings, April 2025). Comparisons with typical pay stop being useful at this level — what matters is how efficiently each extra pound is converted into net income, pension and assets.

Full 2025/26 Breakdown Side by Side

Figures are for England, Wales and Northern Ireland under 2025/26 rates — thresholds are frozen to 2028, so they hold for 2026/27 as well. Scottish income tax bands differ. Pension contributions and student loans are excluded here; both would change the picture in your favour or against it respectively.

Pension Moves That Change the Maths

This is the salary band where pension contributions work hardest. Every £1 you sacrifice into a pension from the £100,000–£125,140 slice costs you only about 38p of take-home pay, because it claws back the personal allowance as well as saving 40% tax and 2% NI. Bringing adjusted net income back under £100,000 also restores tax-free childcare and the funded-hours entitlement, which can be worth thousands a year to parents of pre-school children. If a rise like this one lands you in the trap, a bonus-sacrifice or increased pension percentage is usually the first lever to pull — see our guide to the £100k tax trap.

What the Difference Means in Practice

An extra £633 a month is a genuine lifestyle shift: it comfortably absorbs a bigger mortgage payment, funds a healthy chunk of an annual ISA, or covers most of a nursery place. Jumps to £120,000 typically come with senior leadership, a move into a higher-paying sector such as finance, law or tech, or NHS consultant-plus-extras territory.

Is the Jump Worth It?

When weighing a move from £100,000 to £120,000, look past the headline number. Employer pension contributions are usually a percentage of the higher salary, so the rise compounds inside your pension even while the taxman takes his share of the cash. If you are still repaying a student loan, Plan 2 adds another 9% to the marginal rates above, and at a typical 4.5× income multiple, the difference in borrowing power is about £90,000. Weigh working hours, bonus structure and equity too — at this level they often move more money than base salary. See the full standalone breakdowns: £100,000 after tax and £120,000 after tax.

Frequently Asked Questions

What is the difference in take home pay between £100,000 and £120,000?

Moving from £100,000 to £120,000 gives you £7,600 more take home pay per year — about £633 per month — after income tax and National Insurance under 2025/26 rules (thresholds frozen to 2028).

How much of the £20,000 pay rise do you actually keep?

You keep about 38% of it. Extra income tax takes £12,000 and extra National Insurance £400, leaving a net gain of £7,600 a year.

Does the 60% tax trap affect salaries between £100,000 and £120,000?

Yes. Between £100,000 and £125,140 the personal allowance tapers away, creating an effective marginal rate of about 62% including National Insurance. £20,000 of this rise falls inside that zone, where you keep only around 38p per £1. Pension contributions that bring adjusted net income back below £100,000 can restore the allowance.

Is £120,000 a good salary in the UK?

Yes — £120,000 is roughly 3.1 times the UK median full-time salary of £39,039 (ONS Annual Survey of Hours and Earnings, April 2025). After tax it delivers about £6,346 per month, though the effective deduction rate is 36.5%.

Related Comparisons