The personal allowance taper begins when your income exceeds £100,000, creating an effective 60% tax band for earnings between £100,000 and £125,140. For every £2 you earn above £100,000, you lose £1 of your £12,570 Personal Allowance, which disappears entirely once your income reaches £125,140. This means that each additional £1 earned within this range can attract 40p in income tax and a further 20p in tax due to the loss of your personal allowance.
This 60% tax trap can affect company directors, contractors, landlords and higher-earning employees whose income falls within this range. With the Personal Allowance threshold frozen until April 2028, more taxpayers could become exposed to higher effective tax rates as their earnings increase. However, strategies such as pension contributions, Gift Aid donations, salary sacrifice arrangements and careful income planning may help reduce the impact.
Key takeaways
Under the personal tax allowance 2026/27 rules, the standard personal allowance is £12,570 before the taper applies to higher earners. Once your adjusted net income passes £100,000, HMRC reduces that allowance by £1 for every £2 above the threshold. Adjusted net income means your total taxable income minus certain reliefs, such as gross pension contributions and Gift Aid donations. By the time your adjusted net income reaches £125,140, the allowance has gone completely
The table shows why the taper earns its trap reputation: between £100,000 and £125,140, you pay 40% income tax on your next pound, and because you simultaneously lose tax-free allowance, the true marginal rate on that slice comes to 60%.
If your allowance has already started to reduce, our guide to why you may be losing your £12,570 Personal Allowance explains the wider reasons your tax-free amount can fall and what higher earners should review before making tax-planning decisions.
Anyone whose adjusted net income sits between £100,000 and £125,140 falls inside the taper zone. In practice this catches:
When does the personal allowance reduce? The reduction begins once adjusted net income exceeds £100,000, which makes monitoring total income particularly important for higher earners.
Because the threshold stays frozen until April 2028 while wages and rental profits rise, more taxpayers cross £100,000 every year without changing anything about their affairs.
The 60% tax band exists because two things happen at once. First, income in this zone attracts the higher rate of 40%.
Second, for every £2 you earn, you lose £1 of allowance that previously carried no tax, so that £1 of income now carries 40 pence of tax too. £2 of income therefore produces 80 pence of higher rate tax plus 40 pence from the withdrawn allowance: 120 pence on £2, an effective 60% on the slice.
Take a director with £110,000 of adjusted net income in 2026/27:
Compare two colleagues earning £99,000 and £110,000: the second pays around £9,640 more in income tax on just £11,000 more income, because the tapered allowance accelerates the bill. National Insurance sits on top, although employee Class 1 NICs stop above the Upper Earnings Limit, so the income tax taper dominates the arithmetic.
The income tax bill tells only part of the story. Adjusted net income above £100,000 switches off several other entitlements:
If you have children in funded childcare, £101,000 of income can genuinely cost thousands of pounds, which is why small reductions in adjusted net income can pay back far more than the tax alone.
Understanding how the personal allowance taper works is important when deciding which tax-planning steps could reduce your adjusted net income. The main options include:
The right approach depends on your income, cash flow, pension position and wider financial circumstances. Higher earners considering pension contributions should also review the pension tax relief rules for higher earners before deciding how much to contribute. Professional tax planning can help determine which options are appropriate and how they affect your overall tax position.
Apex Accountants helps directors, contractors and landlords understand how the personal tax allowance 2026/27 rules affect their tax position and plan around the £100,000 threshold.
We model your salary, dividend and rental income against the taper before the year runs away from you, calculate the exact pension contribution or gift aid payment that restores the most allowance for the cash you commit, and check the knock-on effects on marriage allowance, childcare entitlement and your tax code.
If a bonus or a property sale tips you into the band mid-year, we adjust the plan then, not after the self-assessment bill arrives. Where tax code K has appeared unexpectedly, we reconcile it against the year’s actual income so you neither underpay nor lend HMRC interest-free money. The first step is a short call to put your numbers against the 2026/27 bands.
Generally, no, but £100,000 is not the Marriage Allowance threshold. Marriage Allowance normally requires the recipient to be liable only at the basic rate or the starter, basic or intermediate rates in Scotland. Eligibility is therefore usually lost well before income reaches £100,000.
A K tax code is used when income or deductions that need to be taxed through PAYE are greater than your available tax-free Personal Allowance. It can arise from untaxed income, taxable benefits or tax owed from an earlier year. A K code is not automatically issued simply because the Personal Allowance taper applies. If your allowance changes, HMRC may also adjust your PAYE code. Our guide to tax codes and personal allowances explains how different tax codes can affect the amount deducted from your pay.
The personal allowance is calculated separately for each tax year. If your adjusted net income falls to £100,000 or below, you can generally receive the full standard Personal Allowance, subject to your wider tax circumstances. HMRC may also update your PAYE tax code accordingly.
Under current law, no. For 2027/28, the standard Personal Allowance remains £12,570, and the taper continues once adjusted net income exceeds £100,000. The Personal Allowance is currently legislated to remain at £12,570 through 2030/31.
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