A six-figure salary used to be the line between “comfortable” and “doing really well”. These days, a lot of people earning £100,000 or more would strongly disagree. In fact, there’s even a nickname for them now: the “Henry”.
High Earner, Not Rich Yet.
And surprisingly, the Henrys might have a point.
Despite being among the highest earners in the UK, plenty of people on £100k are feeling squeezed, frustrated and wondering why earning more sometimes seems to leave them with less. The numbers explain it better than anything.
The £100k Tax Trap 😬
The UK tax system becomes uniquely punishing once you cross the £100,000 mark.
Once you earn more than £100,000 in adjusted net income, you start to lose your personal allowance. For every £2 over that threshold, you lose £1 of the £12,570 allowance. By the time your income hits £125,140, you lose it completely.
That gives you a marginal tax rate of 60%. Add 2% national insurance. Add a potential 9% student loan. You can lose up to 71p of every extra £1 earned.
The threshold is based on adjusted net income, which is calculated after pension contributions. So if you contribute 5% via auto-enrolment, you could technically earn up to £105,263 before crossing the £100k cliff edge.
Being Single Makes £100k Go Less Far 💸
A single person earning £100,000 often takes home less than a couple earning £50,000 each. Why? Because the couple gets two personal allowances and two basic-rate bands.
The difference in take-home pay can easily be more than £6,000 a year despite identical total income.
And when there’s only one income covering rent or mortgage, utilities, insurance, food, childcare and emergencies, things feel tight fast.
Young Families Get Hit Even Harder
This is where it gets painful.
Once adjusted net income rises above £100,000 you lose:
- tax-free childcare (worth up to £2,000 per child)
- funded nursery hours
- up to 30 hours of free childcare
A single pound over the threshold can cost:
- around £7,775 a year if you lose 15 funded hours each for two children
- around £15,550 a year if you lose 30 hours each
It is genuinely a cliff edge.
Better Off Earning Less? 🤷♂️
HMRC data shows lots of people deliberately staying below £100k.
There are roughly:
- 31,000 people earning £98,000
- 31,000 earning £100,000
- 41,000 earning £99,000
That spike at £99k is no accident.
People are actively using:
- salary sacrifice
- pension top-ups
- bonus deferral
- strategic income timing
All legitimate, but the fact people feel forced into this shows how punishing the cliff edge is.
The People Who Feel It Most ❤️
The Henrys who feel squeezed tend to be:
- parents
- single-income households
- people supporting extended family
- people without expected inheritance
- households with high housing or childcare costs
- people trying to save without a financial safety net
It’s not the headline salary that matters.
It’s the gap between what you earn and what your life costs.
Using Pensions and Gift Aid To Stay Under £100k 💡
One of the most effective ways to avoid the £100k tax trap is to reduce your adjusted net income.
Two main tools help:
1. Pension contributions
Anything you pay into a pension reduces your adjusted net income pound for pound.
Example:
Earn £110,000
Contribute £10,000
Adjusted net income becomes £100,000
You keep your full personal allowance
If you want a simple, flexible pension option for directors and self-employed people, Penfold is worth considering because it keeps everything clear and easy to track.
2. Gift Aid donations
Gift Aid extends your basic-rate band, which reduces the slice of income that counts toward adjusted net income.
This can restore your personal allowance and bring your effective rate down from 60% back to normal levels.
Many Henrys use a mix of pension contributions and Gift Aid to stay below the threshold.
What Can You Do?
There are plenty of ways to plan around the £100k cliff edge, from pension contributions to careful timing of bonuses and charitable giving.
If you’d like help navigating it or want clarity on your adjusted net income, get in touch. We can help you structure things in a way that feels calmer and more predictable.
Because earning more should feel like progress, not punishment.
