It wasn’t all that long ago that salaries and incomes of over £100,000 a year remained a rather rare occurrence. But the number of people earning a higher base salary and bringing in a total income over £100k has increased significantly since the millennium. Six-figure remuneration packages can now be found in most sectors, including the public sector, but even a high base with commissions or bonus payments can take you into £100k territory.
Whilst breaking the £100k mark can still feel like a personal career high, it’s worth being aware of the tax implications of being in the top 2% of the UK’s earners throughout the tax year.
What are the tax implications of earning over £100K?
Looking at the table below (concerning the current tax year from April 6th 2024 to April 5th 2025), you might be fooled into thinking that there is no discernible difference in your tax rate for earning £100,000. The reason for this is that it would suggest you remain in the higher rate bracket and will continue to pay 40% on earnings between £50,271 and £125,140. But what this does not show is an effective 60% (40% + 20%) rate which begins to take effect once you pass the £100,000 mark.
At this point HMRC starts reducing your annual allowance, effectively increasing the rate of tax between £100k and £125k by 20%. Under this rule, your personal allowance is reduced by £1, for every £2 of earnings over £100,000. So, if you would normally receive the full personal allowance** but your income is £100,002, then your personal allowance reduces to £12,499 and so on for each additional £2 income. This means that you begin paying basic rate tax at 20% on each £1 lost from your allowance.
| Income | Tax Rate | |
| Up to £12,570 | 0% | Personal Allowance |
| £12,571 to £50,270 | 20% | Basic Rate |
| £50,271 to £125,140 | 40% | Higher Rate |
| Over £125,140 | 45% | Additional Rate |
*This table is the correct information from 12/6/24. Tax rates are liable to change in the annual budget each year so please check the prevailing rates at the time of reading.
**Please also be aware that £12,570 is the starting personal tax allowance and does not reflect any reductions in your personal circumstances from BIK/P11D restrictions e.g., company car, private medical etc.
