Why new partners earning over £100k means more work for law firm HR teams

For many associates, landing that longed-for promotion to partner and crossing the £100,000 salary threshold is a huge professional milestone. From an HR and rewards perspective, however, this transition can often bring added complexity rather than simplicity.

While lawyers are used to dealing with detail, the tax implications associated with higher earnings are not always well understood. As a result, newly promoted partners may find themselves facing unexpected outcomes in their take-home pay, and HR teams are often the first point of contact for questions and concerns.

Below, we outline some of the key considerations for HR professionals supporting colleagues who move into six-figure earnings.

Stealth tax or tax in plain sight?

The UK’s tax regime puts in place an automatic way to take more tax from pay pockets. Commonly referred to as a stealth tax, HMRC gradually reduces the personal allowance once someone’s income goes over £100k. When you earn more than this, the amount you can earn tax-free is shrunk, meaning more of your income is taxed at a higher rate.

The standard personal allowance for the 2025/26 tax year is £12,570  (the amount you can earn before paying income tax).

Once you go above £100,000, this allowance is reduced by £1 for every £2 of income above that level. This tapering continues until the allowance reaches zero, which typically happens when income reaches £125,140.

This creates an effective marginal tax rate of around 60% within the £100,000 – £125,140 band. In other words, for every extra pound earned in this range, a significant portion is lost through a combination of higher tax and reduced allowance.

Why this often affects junior partners

For new partners, their total income my include a combination of salary, profit share, dividends, or other sources such as rental income or investments.

All of these elements contribute to adjusted net income, which is the figure used to assess whether the personal allowance is tapered. Where income is not fully managed through PAYE, self-assessment obligations and tax planning considerations become more important.

Additional factors that may affect the overall financial position include:

• National Insurance contributions, which can vary depending on employment or partnership status
• The gradual loss of certain allowances or reliefs as income increases
• The reduced marginal benefit of pay rises where a significant portion of additional income is taxed at higher effective rates

Together, these factors can make an otherwise positive career move feel financially underwhelming, at least in the short term.

How can HR help partners cushion the tax trap?

It is important to be clear that HR teams are not providing tax advice. However, they can play a valuable role in improving awareness and signposting appropriate support so that newly promoted colleagues are better prepared for the change in their tax position.

Pension contributions

Paying more into a pension can reduce an employee’s adjusted net income, potentially restoring part or all of their personal allowance because tax relief is applied to what are known as qualifying contributions. HR teams can ensure that information about pension options and limits is clearly communicated, particularly at key career transition points.

Salary sacrifice arrangements

Salary sacrifice can be used to redirect part of a salary into benefits like a pension to lower income that can be taxed. Rewards and benefits professionals can ensure schemes are correctly structured and communicated well so employees can make better informed decisions when planning their finances.

Supporting informed decisions

By focusing on education, transparency and appropriate signposting, HR teams can help ensure that newly promoted partners are better informed about the financial implications of higher earnings. This approach supports individuals in making considered decisions and reduces the risk of misunderstandings or dissatisfaction during an important career transition.

While progression and pay increases are designed to recognise contribution and responsibility, ensuring people fully understand the financial landscape they are entering can help those rewards land as intended.

Please note:

Secondsight is a trading name of Foster Denovo Limited, which is authorised and regulated by the Financial Conduct Authority.

This article is for general information only and does not constitute advice.

All information is correct at the time of writing and is subject to change in the future. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.