What is the 100K trap in the UK?

The 100K Trap: A Hidden Tax Pitfall for UK Earners

For many professionals in the UK, hitting a six-figure salary feels like a major milestone. But what few realise is that earning between £100,000 and £125,000 can come with a nasty surprise—the so-called “100K trap.” This isn’t just about higher tax rates; it’s about losing your personal allowance, and it hits harder than most expect.

Here’s how it works: everyone in the UK gets a tax-free personal allowance—currently £12,570. But once your income climbs above £100,000, that allowance starts to shrink. For every £2 you earn over £100K, you lose £1 of your personal allowance. Effectively, you’re being taxed at a marginal rate of 60% on income between £100,000 and £125,140.

This means that in some cases, earning more actually leaves you worse off—or at least with barely any extra take-home pay. For example, someone earning £102,000 could end up with less net income than someone on £100,000 after tax and lost allowances.

Many people only discover this trap when they get their tax bill or review their payslip. It affects salary increases, bonuses, and even some benefits in kind. The impact is especially pronounced for single earners—couples with combined income near this threshold may find tax planning even more critical.

While the rule is straightforward, its consequences aren’t always obvious. Financial advisers often recommend reviewing income timing—such as deferring bonuses into a pension or Isa—to avoid unnecessary tax hits. Awareness is key: knowing about the 100K trap can help you keep more of what you earn, rather than handing it over in silent, incremental taxation.