Applies when your adjusted net income exceeds £100,000 in a tax year – adjusted net income is total taxable income minus certain deductions like pension contributions.

Personal allowance for the current tax year (e.g., £12,570) is reduced by £1 for every £2 of income above £100,000, effectively increasing your taxable income.

If your income reaches £125,140 or more, your personal allowance is zero, meaning all income is taxed at applicable rates.

This affects all types of taxable income: employment income, self-employment profits, dividends, rental income, and savings interest.

For married couples or civil partners, the loss is calculated individually based on each person's own income – there's no joint allowance reduction.

Pension contributions can reduce your adjusted net income, potentially preserving some or all of your personal allowance if made before the tax year-end.

Gift Aid donations also reduce adjusted net income, helping to mitigate the loss of personal allowance.

The reduction happens automatically in your tax calculation – you don't need to claim it, but you must report accurate income to HMRC.

If your income fluctuates, you might lose your allowance in high-earning years but regain it in lower years – careful tax planning can help.

Loss of personal allowance can push you into higher tax bands, increasing your overall tax liability significantly if not managed.