The 40% tax band: What happens when your income grows
As your career develops, it’s common to move from the basic-rate tax band into the higher-rate band, where income between £50,271 and £125,140 is taxed at 40%. This doesn’t mean all your income is taxed at 40%, only the portion above the threshold, but it does mean that pay rises can feel smaller than expected.
For midcareer earners and families, this shift can have a noticeable impact. More of your income goes to tax, and some allowances begin to shrink. Understanding where you sit in the tax bands helps you plan for the future, especially if you’re close to crossing a threshold.
Child Benefit & tax thresholds
If you receive Child Benefit, the £60,000 threshold is particularly important. Once one partner’s income exceeds this level, the High-Income Child Benefit Charge applies. You’ll pay back 1% of your Child Benefit for every £200 earned over £60,000, and at £80,000 the benefit is fully clawed back. For many families, this can come as a surprise, especially if a pay rise or bonus pushes income just over the line.
Salary sacrifice
Salary sacrifice can be a powerful way to reduce your taxable income and stay below key thresholds like £50,000 or £100,000. By redirecting part of your salary into benefits, you lower the amount of income that is taxed. Popular options include pension contributions, electric car schemes, cycle-to-work programmes and additional holiday purchase. These not only reduce your tax bill but can also boost long-term savings or improve your lifestyle.
Planning pay rises, bonuses, and promotions
As your income grows, timing matters. A bonus paid at the wrong moment can push you into a higher tax band or trigger the Child Benefit charge. In some cases, spreading a bonus across tax years or increasing pension contributions can help you stay below thresholds. If you’re expecting a promotion or negotiating a pay rise, understanding how it interacts with tax bands gives you more control over your financial outcomes.
Using allowances as your income grows
Higher-rate taxpayers still benefit from allowances, but some shrink as income rises. The savings allowance drops to £500 for higher-rate taxpayers (compared with £1,000 for basic-rate), and while the dividend allowance applies to everyone, it becomes more valuable if you have investments. Trading and property allowances can also help with small amounts of side income. Knowing which allowances, you still qualify for helps you make the most of every pound you earn.
As your income grows and life becomes more financially complex, understanding how tax thresholds work can make a real difference to your take-home pay and long-term plans. But you don’t have to figure it all out on your own.
A financial adviser can help you navigate the higher-rate band, manage the impact of Child Benefit rules, make the most of salary sacrifice and use allowances in a way that fits your goals.
If you’re unsure where you stand or want to plan more confidently for the years ahead, now is a great time to have that conversation. A quick chat with an adviser can give you clarity, reassurance and a clear plan for moving forward.
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Approved by The Openwork Partnership on 28/01/2026.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.