Most UK tax bands are gradual: earn more, pay a bit more. £100,000 of adjusted net income is not like that. It is a cliff edge where the tax rate jumps and, for parents of young children, support disappears in the same step.
What counts towards the £100,000 line
The test is adjusted net income (ANI): total taxable income, including salary, bonus, the value of RSU vests at the date they vest, dividends, and rental or savings income, minus gross pension contributions and Gift Aid donations. It is not just your salary, which is what catches people who think a £95,000 contract keeps them safely clear.
Two things happen on the same line
- Personal allowance taper: you lose £1 of the £12,570 tax-free personal allowance for every £2 of ANI above £100,000, gone entirely by £125,140.
- Childcare support: Tax-Free Childcare and England's working-parent funded hours test each parent's expected ANI against £100,000. Above it, eligibility for those schemes ends. Universal 15 hours for three- and four-year-olds remain available; entitlement timing and any grace period need a separate check.
Why it is 60%, not 40%
On the slice between £100,000 and £125,140 you pay 40% income tax in the normal way, and you also lose personal allowance that was previously shielding part of your income from tax altogether. Losing that shield is mathematically equivalent to roughly another 20 percentage points of tax on the same slice, which is why the effective rate lands around 60%.
Why it hits parents harder
For a household with young children in paid childcare, the same £1 over £100,000 can also remove Tax-Free Childcare and funded hours, worth thousands of pounds a year per child. Because each parent's ANI is tested individually, a single earner tipping over the line costs support calculated across the whole family's childcare arrangements, not just that parent's own tax.
Who gets caught without meaning to
- Anyone with a base salary close to £100,000 who gets a bonus, a small pay rise, or interest on savings.
- Equity-paid employees: an RSU vest is taxable income on the day it lands, and vests are lumpy, so a salary that looks safely under £100,000 can be pushed over by a single vest.
- Two-earner households where neither partner is individually high-earning, but a bonus or vest pushes one of them over for that one tax year.
Three ways back under £100,000
- Salary sacrifice into a pension: reduces ANI pound for pound and saves employee National Insurance too, if your employer offers it.
- A personal pension or SIPP contribution: the gross amount (after the 20% top-up) reduces ANI in the same way, without needing an employer scheme.
- A Gift Aid donation: grossed up by 25%, the gross figure reduces ANI exactly like a pension contribution.