Income over £100,000: how the Personal Allowance is withdrawn in 2026/27
Published · 5 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Between £100,000 and £125,140 of adjusted net income, the tax-free Personal Allowance shrinks by £1 for every £2 earned. This guide explains how that works, what it does to the tax you pay, and how it is measured.
What the Personal Allowance taper is
The Personal Allowance is the amount of income you can receive each tax year before paying Income Tax. For 2026/27 (6 April 2026 to 5 April 2027) the standard figure is £12,570. Once your adjusted net income goes above £100,000, GOV.UK says the allowance goes down by £1 for every £2 of income above that level. It reaches zero when income hits £125,140, so anyone at or above that figure has no allowance at all. People often call this the taper, and it is the reason the effective tax rate on this slice of income is higher than the headline rate.
Adjusted net income is not the same as your salary. It is your total taxable income before Personal Allowances, less certain reliefs, including Gift Aid donations and pension contributions paid gross. HMRC's guidance explains that for every £1 donated under Gift Aid you subtract £1.25, and that where a pension provider has already added basic-rate relief you subtract £1.25 for every £1 you paid. Savings interest, dividends, rental profits and taxable benefits in kind all count towards the starting figure, which is why some people with a salary below £100,000 can still be affected.
The key figures
Because losing £1 of allowance makes £1 more of your income taxable, the taper adds an extra layer of tax. In England, Wales and Northern Ireland, someone in the 40% band loses £1 of allowance for every £2 earned, so each extra £2 brings 80p of ordinary tax plus 40p on the £1 of allowance that has just become taxable. That is £1.20 on £2, or 60%. We calculated this from the published rates and it applies only between £100,000 and £125,140. Above £125,140 the allowance is gone and the rate drops to 45%.
Scotland has its own Income Tax bands for non-savings, non-dividend income. For 2026/27 GOV.UK lists a higher rate of 42% from £43,663 to £75,000, an advanced rate of 45% from £75,001 to £125,140, and a top rate of 48% above £125,140. The £100,000 and £125,140 taper points are the same. Applying the same logic as above to the 45% advanced band gives an effective rate of 67.5% (0.45 plus half of 0.45, our own calculation) on income inside the taper range, so the pinch is sharper for Scottish taxpayers.
A worked example
For example, suppose someone in England has adjusted net income of £110,000 and no other complications. That is £10,000 over the threshold, so the allowance falls by £5,000 (£10,000 divided by 2), leaving £7,570 instead of £12,570. Taxable income is £110,000 minus £7,570, which is £102,430. Tax is 20% of the first £37,700, which is £7,540, plus 40% of the remaining £64,730, which is £25,892. The total is £33,432 of Income Tax. National Insurance is ignored here to keep the example simple, and the figures are illustrative.
Now suppose that person pays £10,000 gross into a workplace pension through a net pay arrangement, where contributions come off pay before tax, so adjusted net income falls to £100,000. The full £12,570 allowance returns. Taxable income is £87,430, so tax is £7,540 plus 40% of £49,730, which is £19,892, making £27,432. The difference is £33,432 minus £27,432, which is £6,000. In this illustration a £10,000 contribution reduced Income Tax by £6,000, a 60% effect, matching the rate calculated earlier. That is an illustration of how the rules work, not a suggestion that it suits any person.
Who it applies to, and who it does not
The taper affects anyone who is liable to UK Income Tax and whose adjusted net income exceeds £100,000, wherever they live in the UK, though the rates around it differ in Scotland. It does not affect people whose adjusted net income is £100,000 or less, who keep the full allowance, and it ends in effect above £125,140 because there is nothing left to withdraw. It also interacts with other income-linked rules. For instance, GOV.UK notes that adjusted net income above £60,000 can trigger the High Income Child Benefit Charge, so the same number is often used in more than one test.
- Salary, bonuses, taxable benefits, rental profit, interest and dividends can all count towards the £100,000.
- Gift Aid donations and gross pension contributions can lower adjusted net income.
- Pension tax relief has its own limits, including the £60,000 annual allowance shown on GOV.UK for this tax year.
- If relief at source applies, higher-rate relief beyond the basic-rate amount is usually claimed through Self Assessment.
Common mistakes and what to check
A frequent misunderstanding is looking at salary alone. Bonuses paid late in the tax year, one-off gains in income, or a rise in savings interest can push adjusted net income over £100,000 even if regular pay is lower. Another is mixing up tax years: the figures here are for 2026/27, and the position for an earlier return may differ. Many people check their tax code and any Self Assessment calculation to see whether the allowance has been reduced, because an adjusted code may show a lower allowance than the standard £12,570. It can also be worth confirming whether a pension contribution was made by net pay or relief at source, since the way relief is given affects what is claimed.
Free help is available. GOV.UK sets out the rules, HMRC can explain a tax code, and MoneyHelper offers free, impartial guidance on pensions. Anyone who wants advice specific to their own situation may wish to speak to a regulated adviser or a qualified tax professional. This guide is general information and not personal advice.
Check before you act
Rates and thresholds change, and tax rules differ between England, Wales, Northern Ireland and Scotland. Please confirm every figure on the official pages linked below before relying on it.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
