Crossing £100,000 triggers the personal allowance taper, a hidden 60% tax rate, and the loss of valuable benefits. Here are seven proven strategies to legally reduce what you owe.
The personal allowance — the first £12,570 of income everyone earns tax-free — starts to disappear once your adjusted net income exceeds £100,000. You lose £1 of allowance for every £2 earned above £100k, creating an effective 60% marginal tax rate on income between £100,000 and £125,140.
But the damage goes further. Crossing £100k also means losing eligibility for Tax-Free Childcare (worth up to £2,000 per child per year) and the 15/30 free childcare hours (worth up to £9,400 per child per year). These are cliff edges, not tapers — earn £100,001 and you lose it all.
The good news: every strategy below works by reducing your adjusted net income — the number HMRC uses to calculate the taper. You do not have to earn less. You just need to shelter more. Use our tax calculator to see exactly where you stand right now.
In 2025/26, over 725,000 people are caught in the 60% trap band — up from 300,000 in 2017. Frozen thresholds and rising wages push more people in every year.
This is the single most effective strategy for most people. Personal pension contributions reduce your adjusted net income pound for pound. If you earn £120,000, a £20,000 pension contribution brings your adjusted net income to £100,000 — fully restoring your personal allowance and saving you approximately £8,600 in tax.
You get 60% effective tax relief on every pound contributed in the trap band (£100k–£125k), compared to 40% for a normal higher-rate taxpayer. The annual pension allowance is £60,000, and you can carry forward up to 3 years of unused allowance for even larger contributions.
Your pension provider automatically claims 20% basic-rate relief. You claim the remaining relief through self-assessment or by calling HMRC to adjust your tax code. Do not leave this unclaimed — see our pension tax relief guide for step-by-step instructions.
Salary sacrifice goes one step further than personal pension contributions. Your employer reduces your contractual salary and pays the difference directly into your pension. Because the sacrifice happens before tax and NI are calculated, you save both income tax and National Insurance.
For a £120,000 earner sacrificing £20,000: personal pension contribution saves approximately £8,600 in tax. Salary sacrifice saves the same £8,600 plus around £400 in employee NI. Many employers also pass on their own NI saving (up to 15% of the sacrificed amount), adding another £3,000 to your pension pot.
Ask your employer if they offer salary sacrifice for pension. Most large employers do — it is a simple contractual change. See our salary sacrifice guide for a full walkthrough, or read our dedicated article on salary sacrifice calculations.
Gift Aid donations are one of the most overlooked tools for reducing your adjusted net income. When you donate £10,000 to charity with Gift Aid, the charity claims 25% on top (receiving £12,500). Crucially, the grossed-up amount of £12,500 extends your basic-rate band and reduces your adjusted net income by £12,500.
If you earn £112,500 and make a £10,000 net Gift Aid donation, your adjusted net income drops to £100,000 — fully restoring your personal allowance. The effective cost of the donation is much less than £10,000 once you factor in the 60% marginal relief.
If you already donate to charity, this is free money — simply ensure Gift Aid is ticked and include your donations on your self-assessment return. Enter your Gift Aid donations in our calculator to see the impact on your take-home pay.
Worked example: £112,500 salary, £10,000 Gift Aid donation. Without Gift Aid claim: tax = £36,500. With Gift Aid claim: tax = £29,032. Saving: £7,468 — on a £10,000 donation. Effective cost of giving: just £2,532.
The annual pension allowance is £60,000, but if you did not use it all in the previous three tax years, you can carry the unused amount forward. This means you could contribute £120,000, £180,000, or even £240,000 in a single year if you have three years of fully unused allowance.
This is especially powerful for one-off income events: a large bonus, share vesting, selling a business, or exercising stock options. Rather than paying 60% on the spike, shelter it in your pension.
Check your pension provider statements for contributions in 2022/23, 2023/24, and 2024/25. Subtract from £60,000 for each year to find your unused allowance. Our retirement planner can help you model the impact of larger contributions on your pension pot.
If you have control over when income is received — for example, a year-end bonus, dividend from your company, or freelance invoice — timing it across two tax years can keep you below £100k in both years rather than being in the trap band in one.
Example: You earn £95,000 salary and expect a £15,000 bonus in March 2026. If you receive it all in 2025/26, your income is £110,000 and you lose £5,000 of personal allowance. If you can defer £10,000 of the bonus to April 2026 (into the 2026/27 tax year), you stay at £100,000 in 2025/26 and £10,000 of bonus is taxed at your normal rate in 2026/27.
Company directors have more flexibility here — you can choose when to declare dividends. Employees should discuss bonus timing with their employer or HR department.
The Enterprise Investment Scheme (EIS) offers 30% income tax relief on investments up to £1,000,000 per year. The Seed Enterprise Investment Scheme (SEIS) offers 50% relief on up to £200,000. Both reduce your income tax bill directly.
While these do not reduce your adjusted net income (so they will not restore your personal allowance), they directly offset your tax liability. A £50,000 EIS investment saves £15,000 in income tax. Combined with pension contributions to address the personal allowance taper, EIS/SEIS can significantly reduce your overall tax burden.
These investments carry risk — they are typically in small, unlisted companies. Only consider them if you understand the investment risk and have already maximised lower-risk strategies like pensions. See our EIS/SEIS guide for eligibility and how to claim.
If you are married or in a civil partnership, think about your household income as a whole. If one partner earns £130,000 and the other earns £40,000, shifting income (where legally possible) so neither crosses £100k can save thousands.
For couples where one partner earns under the personal allowance (£12,570), the marriage allowance lets them transfer £1,260 of unused allowance — saving up to £252 per year. While modest, it is free money many couples miss. Check your eligibility with our marriage allowance calculator.
Consider joint investment decisions too: putting investments in the lower earner's name means gains and dividends are taxed at a lower rate. ISAs are individual, so a couple has £40,000 of ISA allowance between them.
These strategies work best in combination. A typical approach for someone earning £125,000:
Step 1: Salary sacrifice £25,000 into pension → adjusted net income drops to £100,000, personal allowance fully restored. Tax saving: approximately £10,750 (including NI).
Step 2: Claim Gift Aid on £2,000 of charitable donations you were already making → additional £1,200 tax saving.
Step 3: Use £20,000 ISA allowance for additional savings → all future growth and withdrawals tax-free.
Step 4: If you receive a one-off bonus, use carry forward to shelter it in your pension.
Use our tax strategies tool to model all of these together and see the exact savings for your income level.
1. Run the numbers. Use our free tax calculator to see your current effective tax rate and how much of your personal allowance you have lost.
2. Check your trap exposure. Our 60% trap analysis tool shows your marginal rate at every income level and calculates the optimal pension contribution.
3. Talk to your employer. Ask about salary sacrifice for pension — it is the single highest-value action most people can take.
4. Review your self-assessment. Make sure you are claiming Gift Aid relief and additional pension relief if applicable.
5. Think annually. Tax planning is most effective when done proactively each tax year, not reactively in January.