If you earn between £100,000 and £125,140, you are paying an effective tax rate of 60% on that income — not the 40% you might expect. For every £2 you earn above £100,000, you lose £1 of your tax-free personal allowance. Combined with the 40% higher rate, this creates a hidden 60% marginal band that catches thousands of business owners every year.
Add National Insurance and the real cost can exceed 70%. The good news: pension contributions, salary sacrifice, Gift Aid, and careful income timing can all pull your adjusted net income back below £100,000 — restoring the full £12,570 allowance and saving you thousands.
The key is planning before the tax year ends. If your income is anywhere near £100,000, speak to your accountant about your options now — not in January when it is too late to act.