A few weeks ago, I was reading an article in The Times that explored a lesser-known quirk of the UK tax system—one that’s quietly influencing the decisions of high-earning professionals across the country.
It looked at the growing number of individuals choosing to structure their income to avoid crossing the £100,000 mark. At first glance, that might sound counter intuitive.
Surely earning more is always better? But what the article revealed—and what many of us are starting to understand more clearly—is that past a certain point, the financial reward for working harder or taking on greater responsibility can begin to diminish significantly. It’s a fascinating and somewhat troubling shift, and one that resurfaced in my mind over the weekend during a discussion with a group of friends.
The conversation wasn’t necessarily about salaries or tax, but as we spoke about career growth, financial planning, and what people’s next steps were, it came up again: that moment when earning more doesn’t always feel like moving forward.
There is a specific point in the UK income tax system—at £100,000—where the rules change dramatically. Not only do you start paying 40% tax on anything earned above that threshold (as part of the higher rate band), but you also begin to lose your tax-free personal allowance entirely. For every £2 you earn over £100,000, £1 of your personal allowance is withdrawn.
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