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Tax planning for high earners.
Above £100,000 the tax system stops being linear. We find the thresholds that matter for you, and plan around them.
Where the thresholds bite.
A pay rise, a bonus or a dividend can cost far more tax than the headline rate suggests.
Tax planning for high earners starts by mapping your income against the thresholds that apply to you, then using pension contributions, Gift Aid, timing and reliefs to keep more of what you earn within the rules.
Where it gets complicated.
The issues we see most often, and plan for.
The 62% tax trap
Between £100,000 and £125,140 the personal allowance is withdrawn, creating an effective 62% rate on earnings once National Insurance is included.
Child Benefit charge
Starts at £60,000 of adjusted net income and claws back the full benefit by £80,000.
Childcare at £100,000
Tax-Free Childcare and the working parent childcare hours stop once either parent's income passes £100,000.
Pension allowances
The £60,000 annual allowance tapers to as little as £10,000 once adjusted income passes £260,000. Unused allowance from 2023/24 expires on 5 April 2027.
Investments
ISAs, and EIS, SEIS and VCT relief (now 20% for VCTs) for those comfortable with the risk.
Share schemes & bonuses
The tax on options, share awards and bonuses, and when to take them.
The 62% tax trap, explained.
The personal allowance of £12,570 is reduced by £1 for every £2 of adjusted net income above £100,000, and is gone completely at £125,140. So each extra £1 in that band costs 40p of higher-rate tax, plus another 20p because 50p of allowance disappears, plus 2p of National Insurance on earnings: an effective 62% rate. That is why it is called the 62% tax trap (or the 60% tax trap, counting income tax alone).
Example: on income of £110,000, a £10,000 gross pension contribution brings adjusted net income back to £100,000, and restores £5,000 of personal allowance. Total tax relief is around £6,000 (40% on the contribution plus 40% on the restored allowance), so the contribution costs about £4,000.
Child Benefit and the £60,000 charge.
If your or your partner's adjusted net income is over £60,000, the higher earner pays the High Income Child Benefit Charge: 1% of the benefit for every £200 of income above £60,000, so it is fully clawed back at £80,000. The same pension and Gift Aid strategies that escape the 62% trap reduce the charge.
Losing childcare support at £100,000.
Tax-Free Childcare and the extra funded hours for working parents stop if either parent expects adjusted net income over £100,000 for the year, even by £1. The universal 15 hours for 3 and 4 year olds is not affected. For a family with young children, that cliff edge can be worth thousands a year, which makes the timing of bonuses and pension contributions matter.
Pension allowances for high earners.
The annual allowance is £60,000, but it tapers by £1 for every £2 of adjusted income over £260,000 (where income before pension contributions is also over £200,000), down to a minimum of £10,000. Contributions above the allowance trigger a tax charge. Unused allowance can be carried forward from the previous three years if you were a scheme member. For 2026/27 that means back to 2023/24, which expires on 5 April 2027.
Investing tax-efficiently.
Beyond pensions, the £20,000 ISA allowance shelters income and gains. For higher-risk investors, EIS offers 30% income tax relief, SEIS 50%, and VCTs 20% for shares issued from 6 April 2026, subject to holding periods. We advise on the tax, not on the merits of the investment.
Common questions.
Pension contributions and Gift Aid donations reduce adjusted net income. Bringing it back to £100,000 restores the personal allowance, so relief is effectively given at 60% on the income tax alone, and the National Insurance saving through salary sacrifice takes it to 62%.
Broadly, total taxable income (salary, bonuses, dividends, rental profits, interest) less gross pension contributions made personally and gross Gift Aid donations.
Yes, for three tax years, if you were a member of a registered scheme in each. For 2026/27 that reaches back to 2023/24, which drops out on 5 April 2027.
Often, yes. Sacrificing salary into a pension reduces adjusted net income and saves NIC. From April 2029, NIC relief on pension salary sacrifice is due to be capped at £2,000 a year.
Not always, but often: for example with rental income, investment income over the allowances, capital gains, the Child Benefit charge, or foreign income. We will confirm your position.
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