Guide
The personal allowance taper
The taper is the mechanism behind the UK's notorious 60% band. Our guide to the 60% tax trap covers the headline effect and the escape route. This one goes underneath it: exactly how adjusted net income is built, how the withdrawal is calculated, how PAYE tries to handle it, and every deduction that pulls you back under the line.
The rule itself
The personal allowance of £12,570 is reduced by £1 for every £2 of adjusted net income above £100,000. The reduction is rounded in the taxpayer's favour to the nearest whole pound of allowance. Because £12,570 doubled is £25,140, the allowance is fully withdrawn once adjusted net income reaches £125,140 - which is precisely why the additional rate threshold sits at that unusual figure.
| Adjusted net income | Allowance kept | Allowance lost |
|---|---|---|
| £100,000 | £12,570 | £0 |
| £105,000 | £10,070 | £2,500 |
| £110,000 | £7,570 | £5,000 |
| £115,000 | £5,070 | £7,500 |
| £120,000 | £2,570 | £10,000 |
| £125,140 | £0 | £12,570 |
What adjusted net income actually includes
This is where most people go wrong. Adjusted net income is not your salary, and it is not the taxable gross on your payslip. It is built from your total income across every source, then reduced by specific reliefs.
Add together: employment income including bonuses and commission, the cash value of taxable benefits such as a company car or medical insurance, self-employment profits, rental profits, savings interest above your allowances, dividends above the dividend allowance, and taxable state benefits.
Then deduct: gross pension contributions including any grossed-up relief at source amount, Gift Aid donations grossed up by 100/80, and certain trading losses and reliefs.
Two consequences follow. First, benefits in kind can push you over £100,000 even when your salary sits comfortably below it - a £40,000 company car adds its full benefit value. Second, a modest cash charitable donation is worth more than its face value here, because the grossed-up figure reduces adjusted net income pound for pound.
Why the marginal rate is 60%
Earn £100 more inside the band and two things happen. The £100 itself is taxed at the 40% higher rate, costing £40. At the same time £50 of allowance disappears, and that £50 was previously untaxed income now taxed at 40%, costing another £20. Sixty pounds of tax on a hundred pounds of income. Add the 2% National Insurance that applies above the upper earnings limit and the true marginal rate is 62%.
A Scottish taxpayer faces the same arithmetic against the 45% advanced rate: £45 plus £22.50, giving 67.5%, or 69.5% with National Insurance. That is the highest marginal rate anywhere in the UK tax system - see Scottish income tax vs the rest of the UK.
Everything that pulls you back under
Pension contributions
The most powerful lever, because the gross amount reduces adjusted net income directly. Salary sacrifice does it through payroll and saves National Insurance as well. Relief at source works too, even though your payslip deductions look unchanged, because the grossed-up contribution still counts. The three routes are compared in pension tax relief: the three methods.
Gift Aid donations
An £800 cash donation becomes £1,000 gross and reduces adjusted net income by £1,000. Inside the taper zone that reclaims £200 of higher-rate relief and restores £500 of allowance worth another £200, so the charity receives £1,000 and the donation costs you £400.
Giving up a taxable benefit
Handing back a company car, or moving to a lower-emission one, removes its benefit value from your income. For borderline cases this can be worth more than the car itself is worth to you.
Timing income
Where you have any control - a bonus election, a dividend from your own company, the date a rental property completes - splitting income across two tax years can keep both years under the threshold. This needs care and usually needs advice.
The cliff edges that sit alongside it
Adjusted net income of £100,000 does more than start the taper. It also ends eligibility for Tax-Free Childcare, worth up to £2,000 per child a year, and in England it ends the funded childcare hours for working parents. Unlike the taper, these are cliff edges rather than gradual withdrawals: a single pound over the line removes the whole benefit.
For a parent of two young children, crossing £100,000 can therefore cost far more than the 60% rate suggests. It is entirely possible for a pay rise to leave a family worse off in cash terms. A pension contribution that keeps adjusted net income at £99,999 protects the allowance and the childcare support at the same time.
How PAYE handles the taper
HMRC estimates your income for the year and issues a tax code with a reduced allowance, usually carrying a T suffix, or 0T once the allowance has gone entirely. That works reasonably well for steady salaries and badly for variable pay. If a bonus, commission or a new benefit changes your income after the code was set, the code will be wrong and the difference is settled later.
If you are anywhere near the threshold, check your coding notice when it arrives rather than after the year ends. Our guide to tax codes covers how to read and correct one.
Model your own position
The take-home pay calculator applies the taper automatically and reports your marginal rate, so you can watch it jump to 62% as you cross £100,000 and fall back again as you increase your pension percentage. Add a bonus in the bonus field to see how a single payment moves you through the band.
Common questions
What is adjusted net income?
It is your total taxable income from all sources, less gross pension contributions, less Gift Aid donations grossed up by 100/80, plus certain adjustments. It is not the same as your salary and it is not the same as taxable pay on your payslip. The taper, the high income child benefit charge and Tax-Free Childcare eligibility are all measured against it.
How much personal allowance do I lose at £110,000?
You lose £1 for every £2 above £100,000, so at £110,000 of adjusted net income you lose £5,000 of allowance and keep £7,570. At £120,000 you keep £2,570. At £125,140 the allowance is gone entirely.
Does a pension contribution really restore my personal allowance?
Yes. Adjusted net income is measured after gross pension contributions, so contributing enough to bring it back below £100,000 restores the full allowance. This works under salary sacrifice, net pay and relief at source, because in each case it is the gross contribution that counts.
Do I need to file a tax return because of the taper?
Not automatically. PAYE can handle the taper through your tax code, usually with a T suffix. But codes are based on HMRC estimates, so if your income varies with bonuses or commission you may end up under or overpaying and need to settle through Self Assessment.
Written for the 2026/27 tax year. General information, not personal tax or financial advice. Large pension contributions interact with the annual allowance and its taper for high earners, so take advice before acting on the strategies described here.