Help Centre/Tax & Pensions/The £100k personal allowance taper

The £100k personal allowance taper

1 min read

Summary

Between £100,000 and £125,140 of income, you lose £1 of personal allowance for every £2 earned, creating an effective 60% marginal rate.
This is modelled precisely, and it significantly affects withdrawal strategy decisions in retirement.

How the taper works

For income above £100,000, you lose £1 of personal allowance for every £2 of income. This creates an effective 60% marginal tax rate between £100,000 and £125,140. The engine models this precisely — it's one of the most important tax traps for higher earners and significantly affects withdrawal strategies in retirement.

Frequently asked questions

Why is the marginal rate 60% and not 40% or 45%?

Above £100,000 you lose £1 of personal allowance for every £2 of income, on top of paying higher-rate tax on that income — the combined effect creates an effective 60% marginal rate between £100,000 and £125,140.

Does the engine model this automatically?

Yes — the taper is applied precisely, and it's one of the most important tax traps the engine accounts for in withdrawal strategies.

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