Pay rise thresholds that cost you money
The short answer: a pay rise never pushes all your income into a higher tax band, only the part above the line. But some thresholds cost far more than the tax rate suggests: the £60,000 Child Benefit charge, the £100,000 point where you lose your personal allowance and childcare help, and the student loan thresholds. Here is how much of a £2,000 rise you keep at each level.
What a £2,000 rise is worth at different salaries
| Salary before the rise | You keep | Lost to tax and NI |
|---|---|---|
| £30,000 | £1,440 | 28% |
| £49,000 | £1,338 | 33% |
| £59,000 | £1,160 | 42% |
| £70,000 | £1,160 | 42% |
| £99,000 | £960 | 52% |
| £124,000 | £889 | 56% |
| £130,000 | £1,060 | 47% |
The worst result in the table is between £100,000 and £125,140, where only about 38p of each pound reaches you.
Every threshold that matters
| Income | What happens | Rate on the next pound |
|---|---|---|
| £12,570 | Income tax and NI start | 28% |
| Student loan thresholds (from about £25,000) | 9% repayments start, plus 6% for a postgraduate loan | 37% or more |
| £50,270 | 40% tax starts; NI drops to 2%; savings allowance halves to £500 | 42%, or 51% with a student loan |
| £60,000 to £80,000 | High Income Child Benefit Charge, if you or your partner claim | Over 50% with two children |
| £100,000 | Personal allowance starts to go; Tax-Free Childcare and funded childcare hours stop | 62%, plus a childcare cliff edge |
| £125,140 | Personal allowance gone; 45% tax above this | 47% |
£50,270: the higher-rate line
Only income above £50,270 is taxed at 40%. Going from £49,000 to £51,000 means £1,270 at 20% and £730 at 40%. Your NI falls from 8% to 2% on the part above, which softens it a little. You also lose half your personal savings allowance, and you may lose the marriage allowance if your partner transfers theirs to you.
£60,000: the Child Benefit charge
If you or your partner claim Child Benefit and the higher earner earns over £60,000, a charge claws it back: 1% for every £200 over, until it is all gone at £80,000. With two children, a £2,000 rise from £60,000 leaves you only about £927 after the charge. See how the Child Benefit charge works.
£100,000: the biggest trap
Between £100,000 and £125,140, you lose £1 of tax-free allowance for every £2 you earn. That makes the rate on this slice about 62% with NI. Worse, at £100,000 and £1 you lose Tax-Free Childcare (up to £2,000 per child a year) and the funded childcare hours for working parents in England. For a family with two young children, earning just over £100,000 can leave them thousands of pounds worse off. See the 60% tax trap.
Student loans add 9%
Student loan repayments are worked out on the same pay. A basic-rate taxpayer repaying a loan loses 37p of each extra pound; a higher-rate taxpayer loses 51p. With a postgraduate loan too, it can reach 57p or more. Whether that matters depends on whether you would ever clear the loan. See will I pay off my student loan?
How to stay below a threshold
- Pension contributions: paying more into your pension lowers your adjusted net income. Through salary sacrifice it also saves NI. A £5,000 contribution can take £105,000 back to £100,000.
- Gift Aid: charity donations also lower adjusted net income for the £60,000 and £100,000 tests.
- Salary sacrifice benefits: electric cars and cycle schemes reduce your gross pay.
- Ask for pension instead of pay: an employer pension contribution never counts as your income. See pay rise or more pension.
Should you ever turn down a pay rise?
Almost never. Apart from the childcare cliff at £100,000, a rise always leaves you better off, even if only a little. And a higher salary feeds into future rises, pension and borrowing. It is usually better to accept the rise and redirect part of it into your pension.
Frozen thresholds mean more people cross them
The income tax thresholds are frozen until April 2031, so normal pay rises pull more people over £50,270 and £100,000 every year. If you are close to a line, check before each pay review.
What you keep from each extra £1,000
| Salary | Kept from £1,000 | With Plan 2 student loan |
|---|---|---|
| £20,000 | £720 | £720 |
| £40,000 | £720 | £630 |
| £50,000 | £618 | £528 |
| £55,000 | £580 | £490 |
| £65,000 | £580 | £490 |
| £90,000 | £580 | £490 |
| £110,000 | £380 | £290 |
| £150,000 | £530 | £440 |
Universal Credit: the hidden rate
If you claim Universal Credit, your payment falls by 55p for every £1 you earn above your work allowance. Add 20% tax and 8% NI, and a pay rise can leave you only about 32p of each pound, or less with a pension or student loan. It still pays to earn more, but the gain is small until your Universal Credit ends.
Other things that can change at higher pay
- Marriage allowance: lost if the receiving partner becomes a higher-rate taxpayer.
- Pension annual allowance: starts to taper for very high earners, above £200,000 of income.
- Dividend and savings tax: higher rates apply once your total income passes £50,270.
- Scotland: Scottish taxpayers have more bands, including a 42% rate starting well below £50,270. Use the calculator with Scotland selected.
This is general information, not tax advice. Figures use 2026/27 rates for England, Wales and Northern Ireland. Scottish bands differ.
Sources
Common questions
Can a pay rise leave me worse off?
Income tax alone never takes more than the rise. But losing Tax-Free Childcare or funded childcare hours at £100,000 can cost more than a small pay rise is worth.
Will I pay 40% tax on all my salary if I go over £50,270?
No. Only the part above £50,270 is taxed at 40%. Everything below is taxed exactly as before.
What is the 60% tax trap?
Between £100,000 and £125,140, you lose £1 of personal allowance for every £2 you earn. With 40% tax and 2% NI, that makes the effective rate on that slice about 62%.
How can I avoid crossing a tax threshold?
Paying more into your pension, especially through salary sacrifice, lowers your taxable income and can keep you below a threshold while the money stays yours.
Does a pay rise affect Universal Credit?
Yes. Universal Credit is reduced by 55p for every extra £1 you earn above your work allowance, on top of tax and NI, so you may keep only about 32p of each pound, or less with a pension or student loan.