Money Lesson Single

The £100k tax trap

Earn just over £100,000 and a hidden 60% tax rate kicks in as your tax-free allowance is withdrawn. The same earner, planned two ways: hand the 60% slice to the taxman, or sacrifice it into a pension.

Employment Expenses ISA

Sacrifice into your pension

1 Goal

Sacrifice 12% of salary into the pension, so the 60% slice is relieved at ~60% and compounds tax-free.

Try this plan

Employment Expenses ISA

Take the pay

1 Goal

Draw the full £110,000 salary and hand the 60% marginal rate on the slice above £100,000 to the taxman.

Try this plan

Sacrifice into your pension Take the pay

Sacrificing that slice into a pension leaves you ~£1.1m wealthier than handing it to the taxman.