# The £100,000 Personal Allowance taper: £1 lost for every £2, a 60% effective rate up to £125,140, worked for a client on £110,000

> Above £100,000 of adjusted net income the Personal Allowance falls by £1 for every £2 and is zero at £125,140. Worked tax at £100,000, £110,000 and £120,000.

- Page to cite: https://aeolookup.com/financial-advisers/personal-allowance-taper-100000-60-percent-tax-band-125140-client-review-worked/
- Publisher: AEO Lookup (https://aeolookup.com/)
- Section: Financial advisers and mortgage brokers, Annual reviews and ongoing service
- Published 22 October 2026
- Key fact: Tax on income at £100,000 is £27,432; at £110,000 it is £33,432; at £120,000 it is £39,432; at £125,140 it is £42,516. Every step in that range costs 60p in tax per extra pound: £6,000 on £10,000, £12,000 on £20,000, £15,084 on £25,140. Above £125,140 the extra pound is taxed at 45p.
- Sources: GOV.UK, "Income Tax rates and Personal Allowances" (standard Personal Allowance £12,570; basic rate 20% on £12,571 to £50,270; higher rate 40% on £50,271 to £125,140; additional rate 45% over £125,140) and GOV.UK, "Income over £100,000" (Personal Allowance goes down by £1 for every £2 of adjusted net income above £100,000; zero at £125,140 or above). Scottish bands, the definition of adjusted net income and the pension and Gift Aid rules that reduce it were not read. Read 22 October 2026.

A paraplanner is preparing a review for a client who earns £98,000 and has just been told to expect a £12,000 bonus. Nothing on the rates table says what the bonus costs after tax. The answer is not 40%. This guide works through the two GOV.UK pages and the arithmetic.

## The rule on GOV.UK

The standard Personal Allowance is **£12,570**. The rates table for the standard allowance:

| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |

The page says income tax bands are different in Scotland, so the figures below are for England, Wales and Northern Ireland only.

On the separate page for higher incomes: "Your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above."

## Why £125,140

The allowance falls by half a pound for every pound over £100,000, so it runs out after twice its own size: £12,570 x 2 = £25,140. Add that to £100,000 and you get **£125,140**, which matches the page.

## Tax at four income levels

Our arithmetic, treating the whole income as taxable and ignoring everything except the standard bands. The basic-rate band is £50,270 - £12,570 = £37,700 wide, so basic-rate tax is £37,700 x 20% = £7,540 in every row.

| Adjusted net income | Allowance left | Taxable income | Higher-rate slice at 40% | Total tax |
|---|---|---|---|---|
| £100,000 | £12,570 | £87,430 | £49,730 x 40% = £19,892 | £27,432 |
| £110,000 | £7,570 | £102,430 | £64,730 x 40% = £25,892 | £33,432 |
| £120,000 | £2,570 | £117,430 | £79,730 x 40% = £31,892 | £39,432 |
| £125,140 | £0 | £125,140 | £87,440 x 40% = £34,976 | £42,516 |

Check on the £110,000 row: £110,000 - £100,000 = £10,000 over, half of that is £5,000 of allowance lost, and £12,570 - £5,000 = £7,570.

## The effective rate

| Move | Extra income | Extra tax | Effective rate |
|---|---|---|---|
| £100,000 to £110,000 | £10,000 | £33,432 - £27,432 = £6,000 | 60% |
| £100,000 to £120,000 | £20,000 | £39,432 - £27,432 = £12,000 | 60% |
| £100,000 to £125,140 | £25,140 | £42,516 - £27,432 = £15,084 | 60% |

The 60% is two things added together. Each extra pound is taxed at 40%, and it also removes 50p of allowance, which is then taxed at 40% too: 40p + (50p x 40%) = 40p + 20p = 60p. On the £12,000 bonus from the opening example, the client's income passes £100,000 by £10,000, so the bonus costs about £6,000 in tax on that slice plus 40% on the £2,000 below the line.

Above £125,140 there is no allowance left to lose, so the extra pound is taxed at 45p.

## What to put on the review note

- **Adjusted net income, not salary.** The page uses adjusted net income. I did not read its definition, so check it before you put a client at £100,001.
- **The width of the zone.** From £100,000 to £125,140 is £25,140 of income taxed at an effective 60%.
- **The saving from moving income out of the zone.** Reducing adjusted net income by £10,000 from £110,000 back to £100,000 changes the tax from £33,432 to £27,432: £6,000. Which routes legitimately reduce adjusted net income, and what they cost the client, is for the adviser to confirm. The GOV.UK pages above do not set it out.
- **Scotland.** Different bands, so a Scottish client needs the Scottish table, which I did not read.

For the rest of the review file, see the [annual review checklist](https://aeolookup.com/financial-advisers/annual-review-checklist-financial-adviser-invitation-to-file-note/), the [tapered annual allowance example](https://aeolookup.com/financial-advisers/tapered-annual-allowance-adjusted-income-over-260000-1-pound-for-every-2-minimum-10000-client-worked/) and the worked [pension carry forward example](https://aeolookup.com/financial-advisers/pension-carry-forward-annual-allowance-2026-27-worked/).

Overlyft ![](https://aeolookup.com/img/d/ours-badge.png) builds AI staff who join your advice team and read your client list before each review season, flag clients whose pay or bonus puts them in the £100,000 to £125,140 zone, and prepare the one-page comparison for the adviser to approve.

This is general information, not financial advice. Check GOV.UK and the client's circumstances before you advise.

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Overlyft: https://overlyft.com/

General information for UK small firms, not legal, tax or financial advice.