Calculator + Guide
Loss of Personal Allowance: Pension Calculator 2026/27
Published by the UK Money Calculators editorial team. Last updated for the 2026/27 tax year.
Income between £100,000 and £125,140 creates an effective 60% marginal tax rate. The personal allowance is gradually withdrawn across this range. Pension contributions reduce adjusted net income and can restore the allowance, making contributions here exceptionally tax-efficient.
The 60% trap explained
The personal allowance of £12,570 is withdrawn at £1 for every £2 of adjusted net income above £100,000. It hits zero at £125,140. What does that mean in practice?
- Every extra £2 of income is taxed at 40% = 80p tax
- That same extra £2 causes £1 of personal allowance to be lost, exposing £1 of previously allowance-sheltered income to 40% = 40p extra tax
- Total: £1.20 tax on a £2 increase in income, an effective rate of 60%
Pension contributions reduce ANI and reverse this. A £10,000 gross contribution for someone with ANI of £110,000 reduces ANI to £100,000, restoring £5,000 of personal allowance and saving £6,000 in income tax.
How much pension contribution to restore the personal allowance?
To restore the full personal allowance, contribute enough to reduce ANI to £100,000. Required gross contribution = current ANI − £100,000. Simple as that.
| Income (ANI) |
Contribution needed |
PA restored |
Total tax saving |
Net cost |
| £102,000 |
£2,000 |
£1,000 |
£1,200 |
£800 |
| £105,000 |
£5,000 |
£2,500 |
£3,000 |
£2,000 |
| £110,000 |
£10,000 |
£5,000 |
£6,000 |
£4,000 |
| £115,000 |
£15,000 |
£7,500 |
£9,000 |
£6,000 |
| £120,000 |
£20,000 |
£10,000 |
£12,000 |
£8,000 |
| £125,140 |
£25,140 |
£12,570 |
£15,084 |
£10,056 |
Assumes contribution fully within the £100k–£125,140 band. Tax savings are approximate (60% effective rate in this range).
30-hour childcare and the HICBC
Pension contributions that reduce ANI below £100,000 also protect 30-hour free childcare eligibility, potentially worth £5,000–£12,000/year. The effective return on contributions near the £100,000 threshold can be well above 60% once childcare is factored in.
Above £60,000, the High Income Child Benefit Charge applies. Contributions that bring ANI below £80,000 reduce the HICBC proportionally. Below £60,000 it disappears entirely. For families with children, targeting ANI below £60,000 stacks child benefit savings on top of income tax relief.
Frequently asked questions
Does the 60% effective rate apply to all income above £100,000?
Only to income (or ANI) between £100,000 and £125,140, where the personal allowance is being withdrawn. Above £125,140, the allowance is gone entirely and the effective rate drops to 45% (additional rate). Below £100,000, the normal 40% higher rate applies (or lower for those fully in the basic rate band).
What is the best pension contribution method for the 60% trap?
All three methods reduce ANI, salary sacrifice, net pay arrangement and relief at source. Salary sacrifice is usually most efficient as it also saves employee NI. Under RaS, the gross contribution (including provider's top-up) reduces ANI. Under salary sacrifice and NPA, the gross salary reduction reduces ANI from the outset.
Can I make a very large contribution to avoid the 60% trap entirely?
Yes, up to the annual allowance (£60,000 or 100% of earnings). Anyone with income consistently in the £100,000–£125,140 range should ideally contribute enough each year to bring ANI to £100,000 exactly. Carry forward from prior years can allow a larger one-off contribution in a high-income year.
Disclaimer: Estimates only, not financial or tax advice. Individual circumstances vary. Consult a qualified adviser.