£120,000 is well into the Personal Allowance taper zone. Take-home is approximately £75,117 per year — £6,260 per month. Of the £20,000 above the £100k threshold, you've only kept roughly £7,600 — the rest absorbed by the 60% effective rate.
Between £100,000 and £125,140, the Personal Allowance is withdrawn at £1 for every £2 of income above the threshold. This creates an effective marginal rate of around 60% — far higher than the headline 40% or 45% rates. Pension contributions can restore the allowance.
| Item | Annual | Monthly |
|---|---|---|
| Gross salary | £120,000 | £10,000 |
| Personal Allowance (tax-free) | £2,570 | £214 |
| Income Tax | −£37,432 | −£3,119 |
| Employee National Insurance | −£4,411 | −£367 |
| Take-home pay | £78,157 | £6,513 |
NI is 2% on all earnings above £50,270.
At £120,000 you are £20,000 into the taper zone. Your Personal Allowance has been reduced by £10,000 — meaning £10,000 that was previously tax-free is now taxed at 40%, costing you £4,000 per year in additional tax. Your effective tax rate on income in this zone is approximately 60%.
The numbers: To escape the taper entirely, you need to reduce adjusted net income to £100,000 — requiring a pension contribution (or Gift Aid) of £20,000 gross. That £20,000 contribution saves approximately £4,000 in PA restoration, plus £8,000 in standard 40% relief, for a total tax saving of £12,000. Net cost: £8,000 for £20,000 in your pension.
Partial contributions still help: If £20,000 is too large in one year, use carry-forward to spread it across years, or target a lower ANI — even £110,000 saves significant tax compared with £120,000.
Your April checklist: Total up all income sources (salary + rental + interest + investment income). Subtract gross pension contributions and grossed-up Gift Aid. If the result is above £100,000, you're in the taper. Calculate how much pension contribution would take you to a clean number (£100k, £110k, etc).