Tax year: 2026/27 | Last reviewed: 2 October 2026
Two income levels create some of the highest effective tax rates in the UK system: £60,000, where Child Benefit starts to be clawed back, and £100,000, where your Personal Allowance starts to disappear. With thresholds frozen, more people cross them every year, often without realising until a tax return or a letter from HMRC arrives.
The £60,000 trap: High Income Child Benefit Charge
If you or your partner have adjusted net income over £60,000 and someone in the household receives Child Benefit, the higher earner pays the High Income Child Benefit Charge (HICBC).
- The charge is 1% of the Child Benefit for every £200 of income over £60,000.
- At £80,000 or more, the charge equals all of the Child Benefit.
For a family with two children, Child Benefit is worth over £2,200 a year. Losing it over £20,000 of income adds around 11% to the marginal tax rate, taking a higher rate taxpayer to over 50%. With three or more children, it is higher still.
Employees can now pay the HICBC through their tax code using HMRC’s online service, instead of registering for Self Assessment just for this.
The £100,000 trap: losing the Personal Allowance
Your £12,570 Personal Allowance is reduced by £1 for every £2 of adjusted net income above £100,000. It is gone completely at £125,140. On income in that band you pay 40% tax plus the loss of allowance, an effective rate of 60%, or 62% once employee NI is included.
The £100,000 line also matters for families. If either parent’s adjusted net income is over £100,000, the household loses Tax-Free Childcare and the extended funded childcare hours. For parents of young children, that can be worth thousands of pounds a year.
How to bring income back down
Pension contributions
Personal contributions reduce adjusted net income by the gross amount. Someone on £110,000 who pays £8,000 net (£10,000 gross) into a pension brings their income back to £100,000, restores £5,000 of Personal Allowance and gets relief at 60%. See our worked example of £25,000 in a pension at a £10,000 cost.
Salary sacrifice
Swapping salary for an employer pension contribution, electric car or cycle to work scheme reduces taxable pay directly and saves NI as well.
Gift Aid
Charitable donations under Gift Aid also reduce adjusted net income by the grossed-up amount. Donations made after the year end can sometimes be carried back. Read Gift Aid tax relief.
For company directors
Directors can choose how much salary and dividend to take each year, and employer pension contributions do not count as income at all. Timing dividends either side of 5 April can keep income under a threshold in both years. See how dividend timing saved nearly £6,900.
Do you need to file a tax return?
Not automatically. If all your income is taxed through PAYE, HMRC may adjust your tax code. But many people above £100,000 file to claim pension relief, and anyone with untaxed income must. See who needs to file a Self Assessment return.
FAQs
What is adjusted net income?
Your total taxable income less grossed-up personal pension contributions and Gift Aid donations.
Should I stop claiming Child Benefit?
You can opt out of payments, but still register the claim if you have a child under 12 and a non-working partner, as it gives them National Insurance credits for the State Pension.
Talk it through with Digivolve
If your income is near £60,000 or £100,000, we will model the pension or Gift Aid contribution that gives you the best return before 5 April.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.