Financial Adviser Leeds: Are You Accidentally Losing 62% Of Your Bonus?

Earning more money should feel like good news.

• A pay rise.

• A bonus.

• A promotion.

• A stronger business year.

Lovely.

But for some people earning over £100,000, the UK tax system has a nasty little surprise waiting.

You might think you are paying 40% tax.

In reality, once the personal allowance taper and National Insurance are included, some employees can lose around 62% of their next chunk of income.

That means a £10,000 bonus might leave you with only about £3,800.

Boo.

This is one of the reasons why proper financial planning matters, especially if you are a higher earner in Otley, Leeds, West Yorkshire or elsewhere in the UK.

What Is The 60% Tax Trap?

Most people have a personal allowance. This is the amount you can usually earn before paying income tax.

For the 2026/27 tax year, the standard personal allowance is £12,570. However, once your adjusted net income goes above £100,000, your personal allowance starts to reduce. It falls by £1 for every £2 of adjusted net income above £100,000. By the time your income reaches £125,140, the personal allowance is gone completely.

That creates the famous “60% tax trap”.

It is not a separate tax rate shown on your payslip. HMRC does not write “Congratulations, you are now in the awkward tax band” in big red letters.

But the effect is real.

How Can A 40% Taxpayer Lose 60%?

Let’s say you earn £100,000 and receive a £10,000 bonus.

You might expect to pay 40% income tax and keep £6,000.

Unfortunately, not quite.

That £10,000 is taxed at 40%, costing £4,000.

But because your income has gone above £100,000, you also lose £5,000 of your personal allowance. That lost allowance is then effectively taxed at 40%, costing another £2,000.

So before National Insurance, your £10,000 bonus has created:

Item	Amount
Bonus	£10,000
Higher-rate income tax at 40%	-£4,000
Extra tax due to lost personal allowance	-£2,000
Amount left before NI	£4,000

That is why people call it a 60% tax trap.

But For Employees, It Can Be Closer To 62%

This is the bit people often miss.

If you are employed, you may also pay employee National Insurance on the bonus.

Above the Upper Earnings Limit, employee National Insurance is usually charged at 2%. The Upper Earnings Limit for 2026/27 is £50,270.

So on that same £10,000 bonus, you may also pay around £200 of employee National Insurance.

Now the numbers look like this:

Item	Amount
Bonus	£10,000
Higher-rate income tax	-£4,000
Personal allowance taper effect	-£2,000
Employee National Insurance	-£200
Approximate amount kept	£3,800

That is an effective deduction of around 62%.

Still pleased with the bonus?

You should be — but it may need planning.

Why This Matters For Higher Earners In Leeds

A lot of people do not think of themselves as “rich”.

They may have a good salary, but they also have a mortgage, children, school fees, car costs, rising bills, elderly parents, pension decisions and a tax system that seems to get more complicated every year.

In Leeds and across West Yorkshire, we regularly see people who are earning well but not planning properly.

Typical examples include:

Situation	Why it matters
You earn between £100,000 and £125,140	You may be caught by the personal allowance taper
You receive bonuses or commission	Your income may unexpectedly jump into the trap
You are a company director	Salary, dividends and pension contributions need coordinating
You have rental income	Property income can push you over tax thresholds
You have savings interest or dividends	Investment income outside ISAs and pensions can make things worse
You claim Child Benefit	You may also be affected by the High Income Child Benefit Charge
You have not reviewed pensions properly	You may be missing valuable tax planning opportunities

This is where independent financial advice can be valuable.

Not because an adviser has a magic wand.

Because someone needs to look at the whole picture.

Can Pension Contributions Help?

Often, yes.

Pension contributions can reduce your adjusted net income. That may help you recover some or all of your personal allowance.

Let’s keep it simple.

If your income is £110,000, you are £10,000 over the £100,000 threshold.

A suitable pension contribution could potentially reduce your adjusted net income back towards £100,000. That may help you:

Potential benefit	Why it helps
Reduce taxable income	Less income caught in the tax trap
Recover personal allowance	Potentially reverses part of the taper
Receive pension tax relief	More money working towards retirement
Improve retirement planning	Turns a tax problem into long-term wealth
Make use of allowances	Especially useful before the end of the tax year

For most people, the standard pension annual allowance is £60,000 for 2026/27, although this can be reduced for high earners or people who have already accessed pensions flexibly. The tapered annual allowance can reduce the allowance to a minimum of £10,000.

So yes, pension planning can be powerful.

But no, you should not just throw money into a pension without thinking.

The Pension Bit People Forget

Pensions are excellent, but they are not just tax-saving boxes.

They are long-term retirement planning tools.

Before making a contribution, you need to think about:

Question	Why it matters
Can you afford to lock the money away?	Pension money is not normally accessible until later life
Do you have enough emergency cash?	Tax planning should not leave you cash poor
Will your employer contribute?	Employer contributions may be valuable
Is salary sacrifice available?	This can improve the overall tax/NI position
Do you have unused carry forward allowance?	Previous tax years may give more scope
Are you affected by the tapered annual allowance?	High earners need extra care
What is your retirement plan?	Tax saving is not the same as financial planning

A pension contribution that saves tax but causes cashflow problems is not clever.

It is just a different problem wearing a smarter jacket.

What About Business Owners?

If you are a company director or business owner, planning can be even more important.

You may have choices around:

Planning area	Possible issue
Salary	Income tax and National Insurance
Dividends	Dividend tax and thresholds
Employer pension contributions	Corporation tax and retirement planning
Retained profits	Whether money should stay in the business
Spouse or family planning	Ownership, income and tax efficiency
Exit planning	How the business fits into retirement
Protection	What happens if illness or death disrupts plans

This is where advice needs to be joined up.

Your accountant may focus on tax.

Your financial adviser should focus on your long-term financial plan.

Ideally, both should work together.

Why A Local Independent Financial Adviser Can Help

You do not always need someone local. Financial advice can be provided remotely.

But there are benefits to working with an independent financial adviser in Leeds if you are based nearby.

You can sit down properly, talk through your goals, look at your pensions, ISAs, investments, tax position, retirement plans and family situation, and build a plan that makes sense.

Not a generic plan.

Your plan.

At Wealth Aspirations, we are independent financial advisers based in Otley, Leeds. That means we are not tied to one product provider or restricted to one investment company.

The aim is simple:

To help you make better decisions with your money.

What Should You Do If You Earn Over £100,000?

Start with the basics.

Before the end of the tax year, ask yourself:

Question	Yes/No
Is my income likely to exceed £100,000?
Will I receive a bonus, commission or dividend?
Do I have rental income or investment income?
Have I checked whether I will lose my personal allowance?
Have I reviewed pension contribution options?
Do I know my annual allowance position?
Have I used my ISA allowance where appropriate?
Have I considered my spouse or partner’s tax position?
Do I understand how this affects my retirement plan?

If you answered “no” to most of those, you may not have a tax problem.

You may have a planning problem.

And planning problems are usually easier to fix before the tax year ends.

A Quick Example

Imagine two people both earn £110,000.

Person A does nothing.

They pay the tax, lose part of their personal allowance, complain about HMRC and move on.

Person B reviews their position early. They check affordability, pension allowances, cash savings, employer contributions and long-term retirement goals. They then make a suitable pension contribution as part of a wider plan.

Same income.

Very different outcome.

That is what financial planning is supposed to do.

It should help you organise your money around your life, not just react to tax bills after the event.

Is This Financial Advice?

No.

This article is general information only. It is not personal financial advice, tax advice or a recommendation to make a pension contribution.

Tax rules can change. Pension rules can change. Your circumstances matter.

A pension contribution that is sensible for one person may be completely wrong for someone else.

Speak To An Independent Financial Adviser In Leeds

If you are earning over £100,000, approaching retirement, receiving bonuses, running a business, or trying to work out whether pension contributions make sense, it may be worth getting advice.

A good financial plan should help answer questions such as:

Question	Why it matters
Am I paying more tax than necessary?	Tax efficiency can improve outcomes
Am I saving enough for retirement?	High income does not automatically mean financial security
Should I use pensions, ISAs or both?	Different wrappers suit different objectives
Can I afford to retire when I want?	Cashflow planning can help clarify this
Is my investment strategy suitable?	Risk, timescale and goals need aligning
What happens if markets fall?	Planning should consider volatility
What happens if I die or become ill?	Protection and estate planning matter

At Wealth Aspirations, we help clients in Leeds and across the UK with pensions, investments, retirement planning, tax-efficient investing and long-term financial planning.

The goal is not to make things complicated.

The goal is to make better decisions before expensive mistakes happen.

Because losing 62% of your bonus without realising it?

That is not a plan.

That is just the tax system winning.

Important Information

This article is for information only and does not constitute financial advice, tax advice or a personal recommendation. The value of investments and pensions can fall as well as rise, and you may get back less than you invest. Tax treatment depends on your individual circumstances and may change in future. Pension contributions are not suitable for everyone, and money paid into a pension is normally not accessible until later life. You should seek regulated financial advice before making decisions.