The personal allowance is the portion of your income you don't pay tax on. In 2025/26 it's £12,570. Earn less than that and you owe no income tax at all. Earn more and you pay tax only on the excess.
Simple enough. Until you earn over £100,000.
How the allowance reduces at higher incomes
For every £2 you earn above £100,000, you lose £1 of personal allowance. By £125,140 the allowance is completely gone.
That taper creates an effective marginal tax rate of 60% on income between £100,000 and £125,140 — 40% income tax, plus losing 20p of tax-free allowance per pound earned.
Here's how it looks:
- Income £100,000: full personal allowance of £12,570
- Income £110,000: allowance reduced to £7,570
- Income £120,000: allowance reduced to £2,570
- Income £125,140+: no personal allowance
The pension solution
Pension contributions reduce your adjusted net income — the figure used to calculate allowance tapering. Many higher earners make additional pension contributions specifically to bring their income below £100,000 and restore their full personal allowance.
Someone earning £110,000 who contributes £10,000 to a pension brings their adjusted income to £100,000, restoring their full £12,570 allowance and saving roughly £5,000 in tax. The pension contribution effectively costs them £5,000 because of the tax saving — a £10,000 contribution at a total cost of £5,000.
Marriage allowance
If one partner earns below the personal allowance threshold and the other pays basic rate tax, the lower earner can transfer £1,260 of their allowance to their partner — saving up to £252 per year. It can be backdated four years, potentially worth over £1,000 for couples who haven't claimed it.
Check your take-home
The salary calculator automatically applies the correct personal allowance based on your income — including the taper reduction above £100,000. Enter your salary to see your exact tax-free amount and take-home figure.