The tax glossary for high earners

Your total pay before anything is taken off: before tax, National Insurance and pension. The number on your contract.

Your total taxable income minus certain reliefs such as gross pension contributions and Gift Aid donations. It is the figure HMRC uses to decide whether you lose your personal allowance, pay the High Income Child Benefit Charge or lose Tax-Free Childcare.

Example. You earn £115,000 but put £10,000 into a pension and give £800 to charity via Gift Aid. Your ANI is about £104,000.

Key thresholds: £60,000 (HICBC starts), £100,000 (personal allowance taper and childcare cliff), £125,140 (allowance fully gone).

The amount you can earn each year with no income tax on it (£12,570 for 2026/27). Above £100,000 of ANI you lose £1 of allowance for every £2 you earn, so it is gone by £125,140.

Between £100,000 and £125,140 of ANI you pay 40% income tax and lose personal allowance at the same time, giving an effective marginal rate of about 60%. Families can also lose Tax-Free Childcare and funded hours entirely.

The tax you pay on your next pound earned, not your average rate. Knowing it tells you whether a pay rise, bonus or vest is really worth what it looks like.

The system your employer uses to deduct income tax and National Insurance from your pay before you receive it.

A tax return you file with HMRC for income or charges PAYE does not fully handle: RSU true-ups, dividends, rental or self-employment income, or the High Income Child Benefit Charge.

Runs 6 April to 5 April. '2026/27' means 6 April 2026 to 5 April 2027. Every threshold in these tools is set per tax year.

Cash on top of salary, taxed through PAYE and counted in your ANI. A large bonus can tip you over the £100,000 cliff.

Shares your employer awards that become yours when they vest. The value at vest is taxable employment income, even if you do not sell, so it raises your ANI and can push you into the trap.

Example. Your salary is £95,000 but £15,000 of RSUs vest. Your ANI jumps to £110,000 and into the 60% zone.

When RSUs vest, your employer usually sells enough shares to cover an assumed flat tax rate (often about 47%). If your real marginal rate is higher, this withholds too little.

The difference between the tax actually due on your RSUs and what your employer withheld via sell-to-cover. A positive true-up is extra tax to settle through self assessment.

Non-cash perks such as a company car or private medical cover. HMRC treats their value as income, reported on a P11D, which adds to your taxable income and ANI.

Benefits in kind where the tax is collected through payroll each month rather than via your tax code. Still counts as income.

You give up part of your gross salary and your employer pays it into your pension. Because it never reaches you as pay, it cuts income tax, employee National Insurance and ANI in one move.

Most personal pensions and SIPPs. You pay in from net pay, the provider adds 20% basic-rate relief, and higher-rate relief is claimed back. The gross contribution reduces your ANI.

A workplace pension taken from pay before income tax (so you get full relief automatically) but after National Insurance. It reduces taxable pay and ANI, but not your NIable pay.

What your employer pays into your pension. It does not count as your taxable income, but it does use up your annual allowance.

The most that can go into your pension each year with tax relief: £60,000 for 2026/27, including employer contributions. Going over can trigger a tax charge.

For very high earners the £60,000 allowance is reduced by £1 for every £2 of adjusted income over £260,000 (only if threshold income also exceeds £200,000), down to a £10,000 floor.

Unused annual allowance from the previous three tax years can be added to this year's, letting you pay in more without a charge, provided you were a pension scheme member.

From 6 April 2029, only the first £2,000 a year of pension salary sacrifice stays free of employee National Insurance. Sacrifice above that is added back to NIable pay.

If the higher earner's ANI is between £60,000 and £80,000, a charge claws back some or all of your Child Benefit; at £80,000 it is fully clawed back.

A weekly payment for each child you are responsible for. Worth keeping even if HICBC applies, as it protects your State Pension record.

The government adds 20% to what you pay for childcare, up to £2,000 per child per year. Lost entirely once either parent's ANI goes over £100,000.

Free funded hours in England for working parents of young children. Also lost above £100,000 of ANI, which is why the cliff hits families twice.

The first £500 of dividends is taxed at 0%. Above that, dividends are taxed at 10.75%, 35.75% or 39.35% depending on your band, stacked on top of your other income.

Tax-free savings interest of £1,000 for basic-rate taxpayers, £500 for higher-rate, and nothing for additional-rate taxpayers.

Tax on the gain when you sell shares (including vested RSUs you kept) above their cost base. The vest value is already taxed as income and becomes your cost base, so only the later growth is a capital gain.

Scotland sets its own bands and rates for earned income (starter, basic, intermediate, higher, advanced and top). The £100,000 personal allowance taper still applies, as does UK-wide National Insurance.