Tax and NI
The £100,000 trap: the Personal Allowance taper
Above £100,000 of adjusted net income the tax-free allowance shrinks, and the slice up to £125,140 is the most heavily taxed of all.
A sole trader in England, Wales or Northern Ireland whose adjusted net income sits between £100,000 and £125,140 pays 62 % on each extra pound of profit in 2026/27, once Income Tax and Class 4 are added together; a Scottish taxpayer in the same slice pays 69.5 %. The reason is the taper written into section 35 of the Income Tax Act 2007: the £12,570 Personal Allowance falls by £1 for every £2 of income above £100,000, so each pound earned drags another £0.50 out of the tax-free band and into the higher rate. At £110,000 only £7,570 of allowance is left; at £125,140 there is none. Adjusted net income is not the same as profit: gross personal pension contributions and Gift Aid donations come off it first, which is why they are the usual way out of the trap. Enter your figure below to see the allowance you keep and the contribution that restores it in full.
The £100,000 allowance trap
Personal Allowance left
£7,570
| Allowance lost | £5,000 |
| Tax and NI on the next £1,000 | 62.0 % |
| Pension to get it all back | £10,000 |
Figures checked by Radif Partners · Editorial policy · How we calculate
Three marginal rates in a row
Follow the cost of an extra £1,000 invoice as a consultant’s profit climbs. Just under £100,000 it costs 42 %: higher-rate Income Tax plus the small Class 4 rate. Once adjusted net income passes £100,000, the same invoice costs 62 %, because half of it also strips allowance away. From £125,140 the allowance has gone, the additional rate of 45 % applies, and the marginal cost settles back to 47 %. The dearest pounds are therefore not the top ones but the £25,140 in the middle. Going from £100,000 to £120,000 of profit adds £12,400 to the Self Assessment bill in England, Wales or Northern Ireland.
| Adjusted net income | Allowance left | Bill rUK | Bill Scotland |
|---|---|---|---|
| £100,000 | £12,570 | £30,689 | £33,989 |
| £105,000 | £10,070 | £33,789 | £37,464 |
| £110,000 | £7,570 | £36,889 | £40,939 |
| £115,000 | £5,070 | £39,989 | £44,414 |
| £120,000 | £2,570 | £43,089 | £47,889 |
| £125,140 | £0 | £46,275 | £51,461 |
Profit is only the starting point
The test uses adjusted net income, not the profit on your return. Begin with all taxable income: trading profit, any salary, rent, savings interest and dividends. Then take off gross personal pension contributions and Gift Aid donations. A photographer with £96,000 of profit and £6,000 of dividends from old shares is over the line even though the business alone is not, and a locum pharmacist at £108,000 who pays £8,000 gross into a personal pension is not in the taper at all. Payments on account are worked out from the bill, so a year spent in the taper also inflates the two advance payments for the following year (see payments on account).
Winning the allowance back with a pension
Contributions to a relief-at-source pension work in two places. The provider adds basic-rate relief straight away, and your tax return claims the rest of the relief while lowering adjusted net income by the gross amount. Take a sole trader with £112,000 of profit who pays £12,000 gross, exactly the excess over £100,000. The provider claims £2,400 from HMRC, so the cash leaving the business account is £9,600. Self Assessment then cuts the bill by £4,800, because the full £12,570 allowance comes back and the contribution earns relief at 40 % rather than 20 %. The pension pot rises by £12,000 for a net cost of £4,800. Class 4 does not move, because it is charged on profit rather than income. The pension relief calculator works out other amounts.
Relief is given on contributions paid in the tax year, which for 2026/27 runs to 5 April 2027. A sole trader only knows the final profit after the year closes, so the usual approach is a rough estimate in February or March from the bookkeeping so far, with any shortfall left for the following year.
Other figures that move with it
Adjusted net income also drives the High Income Child Benefit Charge, which has already taken back all the Child Benefit by the time income reaches £80,000, so a parent in the taper pays that charge in full as well. The £100,000 profit page and the £125,000 profit page show full bills on either side of the trap. Sources: GOV.UK, Income Tax rates and Personal Allowances (2026 to 2027); Income Tax Act 2007, section 35 (personal allowance reduction).