£100k Tax Trap Explained (UK)
Between £100,000 and £125,140, your personal allowance is reduced. This creates an effective tax rate of over 60%.
Why it happens
For every £2 above £100k, you lose £1 of your tax-free allowance.
What it means
You pay higher tax AND lose tax-free income → effective 60%+ rate.
How to reduce it
- Pension contributions
- Salary sacrifice
- Charitable donations