{"id":125199,"date":"2026-09-07T11:15:00","date_gmt":"2026-09-07T10:15:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=125199"},"modified":"2026-09-07T11:12:15","modified_gmt":"2026-09-07T10:12:15","slug":"hmrc-allowance-trap-high-earners","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/hmrc-allowance-trap-high-earners\/","title":{"rendered":"HMRC Allowance Trap Leaves High Earners Losing More of Every Extra Pound"},"content":{"rendered":"\n

Around 2.5 million people are expected to be affected by Britain\u2019s \u00a3100,000 personal allowance taper by 2031, as a threshold unchanged since 2010 captures a growing share of higher earners. Workers with income between \u00a3100,000 and \u00a3125,140 can face an effective marginal income tax<\/strong> rate of 60 per cent because their tax-free personal allowance is progressively withdrawn.<\/p>\n\n\n\n

When National Insurance is included, the amount lost from each additional pound can reach 62p. The issue has become more prominent as earnings have risen while the \u00a3100,000 trigger has remained fixed, bringing considerably more taxpayers into the part of the system where the personal allowance<\/strong> begins to disappear.<\/p>\n\n\n\n

A Threshold Unchanged Since 2010 Is Affecting More Taxpayers<\/strong><\/h2>\n\n\n\n

The personal allowance is reduced by \u00a31 for every \u00a32 of adjusted net income above \u00a3100,000. Once income reaches \u00a3125,140, the allowance has been removed entirely. This creates the unusually high marginal rate between those two points, despite the underlying higher rate of income tax being 40 per cent.<\/p>\n\n\n\n

According to research from investment firm IG, around 2.06 million people currently earn more than \u00a3100,000. The number was 588,000 when the taper was introduced in 2010 and had risen to 1.22 million by the 2021\/22 tax year.<\/p>\n\n\n\n

IG estimates that more than 2.5 million workers will be caught by the threshold by 2031. The Telegraph reported that the proportion of taxpayers earning enough to cross the \u00a3100,000 level has risen from 1.9 per cent when the measure began to 5.6 per cent today.<\/p>\n\n\n\n

Michael Healy <\/a>of IG said the threshold was becoming \u201cincreasingly detached from reality\u201d, arguing that wages and inflation had risen while the trigger remained unchanged. Had the \u00a3100,000 threshold moved in line with inflation, IG calculated that it would stand at roughly \u00a3160,000 today. Sarah Coles <\/a>of AJ Bell said the policy could now affect experienced senior employees, including head teachers and newly promoted NHS consultants without private work, rather than only people at the very top of their professions.<\/p>\n\n\n\n

\"\"
\u00a3100,000 tax trap now affects millions as frozen threshold bites \u00a9 Shutterstock<\/em><\/figcaption><\/figure>\n\n\n\n

Frozen Allowances Are Also Raising More Revenue for the Treasury<\/strong><\/h2>\n\n\n\n

Keeping the threshold unchanged has also increased the amount collected from taxpayers affected by the taper. According to IG, the frozen \u00a3100,000 level has generated an estimated \u00a329 billion<\/strong> in additional tax revenue compared with a system in which the threshold had risen with inflation.<\/p>\n\n\n\n

The investment firm puts the current additional annual tax<\/strong> take at about \u00a35.2 billion. It estimates this could reach \u00a37 billion a year by 2031, while cumulative additional revenue since 2010 could exceed \u00a352 billion by the end of the decade.<\/p>\n\n\n\n

Some workers <\/a>have sought to keep their adjusted income below \u00a3100,000 by making additional pension contributions through salary sacrifice. The Telegraph reported that changes announced by former chancellor Rachel Reeves would introduce a \u00a32,000 cap from April 2029 on workplace pension contributions made through salary sacrifice before National Insurance becomes payable, affecting an estimated 3.3 million workers.<\/p>\n\n\n\n

A Treasury spokesman said the Government was keeping its commitment not to raise income tax, National Insurance or VAT. The spokesman said reducing the personal allowance for incomes above \u00a3100,000 ensured that support was focused where it was most needed, including on funding public services.<\/p>\n","protected":false},"excerpt":{"rendered":"

Millions of higher earners are being drawn into a little-known allowance trap as the \u00a3100,000 threshold remains frozen. With more workers crossing the limit, the tax impact is becoming harder to ignore.<\/p>\n","protected":false},"author":10,"featured_media":125201,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29],"tags":[],"class_list":["post-125199","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxation","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=125199"}],"version-history":[{"count":1,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125199\/revisions"}],"predecessor-version":[{"id":125202,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/125199\/revisions\/125202"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/125201"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=125199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=125199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=125199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}