Personal Allowance Taper

How the Taper Affects High Earners

The personal allowance taper reduces your tax-free allowance by £1 for every £2 you earn above £100,000. By the time your income reaches £125,140, your personal allowance has been completely withdrawn, and you effectively have no tax-free income at all.

This creates one of the most punishing marginal tax rates in the UK system: 60%. On every pound earned between £100,000 and £125,140, you pay 40% income tax on the pound itself, plus 40% on the £0.50 of lost personal allowance, totalling 60p in tax per pound (before NI).

The most effective way to avoid the taper is through pension salary sacrifice, which reduces your adjusted net income below £100,000. This restores your full personal allowance while building retirement savings. Read our detailed guide to the £100K trap.

How Taper Works in Practice

The Personal Allowance taper reduces the £12,570 tax-free allowance by £1 for every £2 of adjusted net income above £100,000. This means the allowance is completely eliminated at £125,140. The taper creates an effective 60% marginal tax rate on income between £100,000 and £125,140 (40% income tax + additional 20% from losing the allowance + 2% NI = 62%).

Practical Tips

The 60% effective rate makes the £100,000-£125,140 income range the most highly taxed in the UK system (higher than the additional rate of 45% that applies above £125,140). The most effective strategy for those in this range is to make pension contributions to reduce adjusted net income below £100,000. A £5,000 pension contribution by someone earning £105,000 saves approximately £3,000 in tax — a 60% return. See £100,000 salary breakdown.

Related Topics

Adjusted net income (used for the taper calculation) is your total income minus pension contributions, Gift Aid donations, and trading losses. See adjusted net income explained.