HMRC‘s estimate that 2.06 million taxpayers will earn above £100,000 in the 2026-27 tax year represents a 5.7% increase (112,000 people) on the current tax year’s estimate of 1.95 million. This is up from 1.218 million in 2021/22.

The rise comes against the backdrop of a growing tax burden caused by frozen income tax thresholds – recently extended to April 2031.

These are pulling more earners into higher tax bands as wages increase over time, exposing thousands to punishing marginal rates and the loss of key benefits such as childcare support

Increasing pressure on those earning £100,000 has given rise to the moniker HENRYs, which stands for high earner, not rich yet. The term is used for those who feel the cost-of-living squeeze despite earning good salaries.

Olly Cheng, Senior Financial Planning Director at Rathbones, said: “Earning £100,000 once felt like financial freedom, but today it often comes with a hidden tax sting.

“Frozen thresholds are inflating tax bills, dragging more people into higher bands, while inflation erodes the real value of earnings.

“This has created a generation of HENRYs where those on strong salaries struggle to build wealth because of the double hit of a growing tax burden and the corrosive effect of inflation.”

Mr Cheng said fiscal drag has become one of the most damaging factors affecting the cost of living.

Crossing £100,000 triggers the tapering of the personal allowance, creating an effective marginal tax rate of 60% (around 62% when National Insurance is included) between £100,000 and £125,140.

Since thresholds were frozen in 2021, the number of £100,000+ earners is expected to rise by 69% by April 2027, pulling thousands into the 60% marginal tax zone.

Mr Cheng recommended three ways of beating the £100,000 tax trap: private pension contributions and salary sacrifice, gifts to charity and share loss relief.

He explained: “One of the simplest ways to avoid or limit the impact of the 60% income tax trap is to pay more into your pension.

“Doing so via salary sacrifice not only saves on income tax but also National Insurance for both employee and employer, making it a more tax-efficient way to boost pension savings compared to personal contributions.

“However, not every workplace offers salary sacrifice, so personal pension contributions remain a valuable option. And with the £2,000 salary sacrifice cap set to take effect from April 2029, more people will rely on private pensions to manage their tax position and boost retirement savings.”

Mr Cheng said donating to charity not only supports good causes but can also help reduce your annual tax bill.

He explained that Gift Aid contributions lower your adjusted net income, as pension payments also do. The expert said if your workplace allows it, you can also use salary sacrifice to make charitable contributions or exchange part of your salary for non-cash benefits.

These might include private medical insurance, which further reduces your adjusted net income. National Insurance savings apply here too, according to Mr Cheng.

On share loss relief, he said: “If you subscribed for qualifying shares – such as those in an Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) company – and they fall in value, you can elect to offset the loss against your income rather than capital gains.

“This means the loss reduces your taxable income at your marginal rate, which for higher earners can potentially save a significant amount in tax.”