Berkshire


<p>Recently secured a stonking pay rise that takes you into six-figure territory? After the Champagne has been suitably inhaled, you <em>may</em> have discovered the maths isn&#8217;t quite mathing when it comes to your take home pay. That&#8217;s the 100k tax trap for you. There&#8217;s no one we trust more to shed light on this hidden tax penalty than Investment Director Sophie Burke-Murphy from&nbsp;<a href="https://featherstonepartners.co.uk/" target="_blank" rel="noreferrer noopener">Featherstone Partners</a> &#8211; a boutique wealth management firm based in Yattendon. So, lean in close and get this bread.</p>



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="1000" height="678" src="https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2025/11/sophie-featherstone-copy.jpg" alt="featherstone partners financial advisors berkshire what is the 100k tax trap how to avoid" class="wp-image-84081" srcset="https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2025/11/sophie-featherstone-copy.jpg 1000w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2025/11/sophie-featherstone-copy-800x542.jpg 800w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2025/11/sophie-featherstone-copy-400x271.jpg 400w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2025/11/sophie-featherstone-copy-768x521.jpg 768w" sizes="(max-width: 1000px) 100vw, 1000px" /></figure>



<h2 class="wp-block-heading" id="h-what-is-it">WHAT IS IT?</h2>



<p>£100,000 is supposed to be the good bit. The milestone. The moment you stop worrying about money. Enter the £100k tax trap: the slightly bonkers situation where earning more doesn’t necessarily mean taking more home. Many people don’t realise that once your income creeps over £100,000, a hidden tax penalty rate of 60% (plus National Insurance) kicks in, shrinking your take-home pay. It’s not a fine or a special tax rate, just a combination of rules that mean extra earnings suddenly get taxed much more heavily than you expect, often leaving people wondering how a pay rise resulted in less money in their pocket. Yikes.</p>



<h2 class="wp-block-heading" id="h-why-does-it-matter">WHY DOES IT MATTER?</h2>



<p>Go a pound over £100k and HMRC quietly starts taking back your £12,570 tax-free allowance, £1 for every £2 you earn until it’s gone completely by £125,140. That&#8217;s all while taxing you at 40% by the way. The result is a sneaky 60% tax rate on part of your income. Then, just for fun, if one parent earns over £100k, tax-free childcare is off the table entirely which can be worth up to £20,000 a year for some families. So, in essence: you earn more, keep less, and pay more for childcare. Make it make sense.</p>



<h2 class="wp-block-heading" id="h-how-to-stay-below-100k">HOW TO STAY BELOW 100K</h2>



<p>Well, the good news is, there is a way around it. Legally, of course. One of the simplest ways to reduce your taxable income is to increase your pension contributions. Anything you put into your pension comes off your taxable salary, so you’re not just avoiding unnecessary tax, you’re building a healthier retirement pot too. Gift Aid donations can also help, lowering your income for tax purposes while supporting charities you already care about. Salary sacrifice schemes are another useful tool, allowing you to swap part of your salary for benefits like pensions, childcare vouchers, or cycle-to-work schemes, and save on both tax and National Insurance in the process.</p>



<p>Take this scenario: if you sacrifice £20,000 from a £120,000 salary into your pension, then your taxable income drops neatly back to £100,000. Same earnings, far less tax drama.</p>



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="1500" height="2250" src="https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy.jpg" alt="how to avoid 100k tax trap" class="wp-image-86241" srcset="https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy.jpg 1500w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy-533x800.jpg 533w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy-667x1000.jpg 667w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy-267x400.jpg 267w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy-768x1152.jpg 768w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy-1024x1536.jpg 1024w, https://dev.muddystilettos.co.uk/berkshire/wp-content/uploads/sites/5/2026/01/financial-freedom-free-marcela-miranda-mHWRiDoMKuM-unsplash-copy-1365x2048.jpg 1365w" sizes="(max-width: 1500px) 100vw, 1500px" /></figure>



<h2 class="wp-block-heading" id="h-what-are-the-benefits">WHAT ARE THE BENEFITS?</h2>



<p>Erm, well, more money for a start. By reducing your salary to £100,000, you&#8217;re not only retaining your full personal allowance (£12,570), but you are avoiding the 60% marginal tax trap AND paying less income tax and NI. Additionally, £20,000 goes into your pension gross, with no tax deducted. Winning or what? It is definitely well-worth asking a financial advisor or accountant to help you crunch the numbers. In fact, you can see the literal proof in the pudding in the table below. Side note: salary sacrifice rules are of course subject to change depending on each budget.</p>



<p><strong>Tax Comparison</strong>:</p>



<figure class="wp-block-table"><table><thead><tr><td><strong>Item</strong></td><td><strong>Without Sacrifice (£120k)</strong></td><td><strong>With Sacrifice (£100k)</strong></td></tr></thead><tbody><tr><td>Taxable income</td><td>£120,000</td><td>£100,000</td></tr><tr><td>Personal allowance</td><td>£0</td><td>£12,570</td></tr><tr><td>Income tax due</td><td>~£39,432</td><td>~£27,432</td></tr><tr><td>NI contributions</td><td>Higher</td><td>Lower</td></tr><tr><td>Pension contribution</td><td>£0</td><td>£20,000</td></tr></tbody></table></figure>



<p><strong>Tax saved</strong>: Around&nbsp;£12,000&nbsp;(plus NI savings).</p>



<p><strong><em>Contact&nbsp;<a href="https://featherstonepartners.co.uk/" target="_blank" rel="noreferrer noopener">Featherstone Partners</a>&nbsp;today for more financial and investment advice. Email:&nbsp;<a href="mailto:hello@featherstonepartners.co.uk">hello@featherstonepartners.co.uk</a>. Phone:&nbsp;<a href="tel:+441635778888">01635 778888</a></em></strong>.</p>



<div style="height:36px" aria-hidden="true" class="wp-block-spacer"></div>



<hr class="wp-block-separator has-alpha-channel-opacity" />



<div style="height:36px" aria-hidden="true" class="wp-block-spacer"></div>



<h2 class="wp-block-heading" id="h-in-the-mood-for-more">IN THE MOOD FOR MORE?</h2>



<ul>
<li><a href="https://hants.muddystilettos.co.uk/life-2/finance/financial-advisor-savings-money-advice/" target="_blank" rel="noreferrer noopener">Stocks, shares and ISAs: where should you really be putting your money?</a></li>



<li><a href="https://hants.muddystilettos.co.uk/life-2/work/employment-contracts-what-to-know-before-you-sign-on-the-line/">Employment contracts: What to know before you sign on the line</a></li>



<li><a href="https://muddystilettos.co.uk/life/finance/housebuild_renovation_heloc-loan_credit-cards-remortgage/">New year, new palace? 5 ways to finance your dream build</a></li>
</ul>


Caught out by the 100k tax trap? Here’s how to tiptoe around it

You may also like