Automated Fibre Placement (AFP) is a manufacturing technique to produce large, high quality composite parts, where preimpregnated carbon fibre tapes are laid side-by-side to generate the composite preform. Thickness changes within a component are realised through internal ply terminations, with the tapes being cut perpendicular to the fibre direction. In plies laid up at an angle to the taper direction, the AFP tape cuts create saw-tooth shaped ply drop tips. This increases the size of resin rich zones and enlarges the region where stress concentrations and cracks can develop, which amplifies the risk of failure. This study investigates the effect of simulated AFP saw-tooth ply drop tips, created by hand layup, on the mechanical properties and failure behaviour of carbon fibre/epoxy composites and compares its results to reference broad goods layups. The stiffness was found to be unaffected and the strength was reduced by ~ 10%. The failure mode was governed by delamination for the saw-tooth ply drop tips, whereas the reference specimens failed by rupture of the unidirectional fibres. A finite element modelling technique was used to select the layup to be tested. The models were then refined in the light of experimental results, to accurately predict the failure and explain the failure mode transition.