25 November 2025

£100k tax trap to hit 2.3m taxpayers by 2029

 

  • Rathbones’ FOI request reveals an additional 493,000 UK taxpayers are set to be caught in the next four years, representing a rise of 27% on the number now.


Nearly 2.3 million taxpayers are set to earn over £100,000 by 2028–29, exposing them to the UK’s most punitive tax trap and stripping families of childcare benefits worth thousands of pounds, according to new HMRC data obtained by Rathbones, a leading UK wealth and asset management firm.

Figures from a Freedom of Information request by Rathbones, show HMRC estimates that 1.8 million taxpayers earned above the £100,000 threshold in 2024–25 and that this number is expected to rise to 2.29 million in just four years, representing an increase of nearly half a million (493,000) working people.

Stephanie Ebner, a Financial Planning Lead at Rathbones, says: “The £100,000 tax trap is one of the most baffling quirks in our tax system. Originally designed to target the very highest earners, after 15 years of inflation and frozen thresholds, it now ensnares thousands of professionals who were never meant to be caught. It has increasingly become a stealth tax on the middle class.”  
“For parents with two children under five, earning just £1 over £100,000 can mean losing childcare support worth almost £20,000. These costs must be covered from post-tax income, so it’s no surprise many are concerned. Hard-working families would need a substantial pay rise just to offset the impact of this tax trap.”

The £100,000 threshold triggers the tapering of the personal allowance, creating an effective marginal tax rate of up to 60% (62% including national insurance) for those earning between £100,000 and £125,140. Once the personal allowance is fully withdrawn, income above £125,140 is taxed at the additional rate of 45%.

This “tax trap” is compounded by the fact that the £100,000 threshold for withdrawing the personal allowance has remained unchanged since its introduction in April 2010. As earnings have risen over time, more people have been pulled into this threshold.

This fiscal drag effect has been amplified by the freezing of main income tax thresholds since April 2021. The number of people losing some or all of their personal allowance is projected to rise by 88% between 2021–22 and 2028–29, from 1.22 million to 2.29 million, according to HMRC estimates.

Speculation of a £2,000 cap on salary sacrifice for pensions could make matters worse. Many employees currently use pension contributions to keep taxable income below £100,000 and retain childcare benefits.

Stephanie Ebner says: “While making a personal pension contribution can achieve a similar effect, it often requires completing a tax return and potentially negotiating with HMRC to keep childcare benefits. For parents of young children, spending a weekend updating tax details online is rarely the best use of time.”