How much tax do you pay above £100k?

Friday 04 July 2025 6:35 am

A rising variety of Brits have seen their salaries hit £100k – however a rising quantity are additionally feeling underwhelmed having crossed the brink. What accounts for his or her disappointment?

There have been as many as 1.35m taxpayers incomes over £100,000 within the UK through the 2022/23 tax yr, a rise of round 16 per cent in comparison with the earlier yr, in keeping with a freedom of data request obtained from tax collector HMRC by RSM.

However the numbers of high taxpayers are typically concentrated within the south of England. Greater than 1 / 4 (28 per cent) are based mostly in London, whereas one other fifth (22 per cent) are based mostly within the South East, the information confirmed.

That being mentioned, the capital noticed the smallest enhance in high-salaried staff in comparison with the earlier yr, with the numbers in London rising 13 per cent to 379,000. Northern Eire noticed the quickest progress, with a 21.4 per cent enhance to 17,000 taxpayers, adopted by the North East, which noticed a 21.1 per cent enhance to 23,000 and Scotland, which noticed a 19.4 per cent rise to 80,000.

The 60 per cent tax lure

An increasing number of of high earners have complained that hitting a wage of 100k or extra doesn’t make them really feel as wealthy as they thought it’d.

One rationalization for this sentiment is the excessive charges of inflation the UK and different main economies have seen over the previous 4 years. Meaning a £100,000 wage right this moment would solely be equal to about £81,000 in 2021.

One other rationalization comes all the way down to a pernicious quirk within the UK tax system, underneath which these incomes between 100,000 and 125,000 endure a steep rise in revenue tax.

Underneath guidelines launched in 2010, taxpayers lose £1 of their private allowance for each £2 earned above £100,000. That implies that as soon as somebody’s wage hits £125,124, they forfeit their private allowance utterly and wouldn’t have any tax-free revenue. That leads to an efficient marginal charge of as much as 60 per cent on the highest slice of the revenue of these incomes £100,000-£125,124.

Since 2021, the non-public allowance of £12,570 has been frozen, regardless of a major bounce in common earnings over the previous 4 years amid rising inflation. Meaning high earners have seen a real-terms fall within the worth of their take-home revenue. In different phrases, somebody who earned £125,000 5 years in the past could be lots higher off than somebody incomes the identical right this moment.

Alongside this development has additionally been a bounce within the variety of earners whose pay falls throughout the so-called ‘60 per cent tax lure’. 

In 2023-24, some 634,000 taxpayers – practically half these incomes over £100,000 – had been thought to fall into the 60 per cent bracket, an increase of round 200,000 in comparison with two years earlier, in keeping with FoI knowledge obtained by Bowmore Monetary Planning.

Tuition price troubles

The pressure felt by six determine earners is being compounded by the truth that a rising quantity will probably be saddled with tens of hundreds of kilos of pupil debt, which they’ll must repay quicker.

From September 2012, tuition charges had been trebled to £9,000 per yr and have since risen to £9,535. Present college students are additionally entitled to an annual upkeep mortgage of as much as £13,762. Meaning a graduate on a 3 yr course might start their careers with greater than £70,000 of pupil debt – or greater in the event that they’ve taken out a postgraduate mortgage.

Graduates pay down their pupil debt at a charge of 9 per cent for levels and 6 per cent for postgraduate diploma loans. The reimbursement threshold at which graduates start to pay down their mortgage has been frozen at £27,295 since April 2021 – a real-terms rise. Meaning a graduate incomes £100,000 might be paying as a lot as £10,900 per yr on tuition price repayments – although after all, meaning they’ll pay their debt down at a quicker charge than the typical graduate, so will see their take-home pay rise after just a few years.

When taken collectively, all this implies a 31-year previous graduate incomes £125,000 can anticipate a take-home pay of as little as £63,134 or simply half their wage. To realize the identical take-home pay of somebody incomes £125,000 4 years in the past, they’d have to extend their wage to round £210,000 right this moment.

So if somebody says they don’t really feel as rich as they’d hoped to as soon as their pay hit six figures – they most likely have some extent.