What Is the 60% Tax Trap in the UK?

The short answer

The "60% tax trap" is the effective rate of income tax paid on earnings between £100,000 and £125,140. It is not an official tax band. It exists because HMRC withdraws your tax-free personal allowance once your income passes £100,000, and losing that allowance costs you tax on top of the tax you already pay on the new income.

The result: for every extra £1 you earn in that band, you keep roughly 40p. The rest goes to HMRC.

All figures here are for the 2025/26 tax year and apply to England, Wales and Northern Ireland unless stated. Rates, thresholds and allowances change, sometimes at short notice, so always check current figures before making decisions.

How the personal allowance taper works

Most people get a personal allowance of £12,570 - the slice of income you can earn before paying any income tax at all.

Once your adjusted net income goes above £100,000, that allowance is reduced by £1 for every £2 of income above the threshold. So:

• At £100,000, you still have the full £12,570 allowance.
• At £110,000, you have £10,000 of income above the threshold, so you lose £5,000 of allowance, leaving £7,570.
• At £125,140, you have £25,140 above the threshold, so you lose £12,570 - the entire allowance.

Above £125,140 the trap ends, because there is no allowance left to lose. You are then simply an additional rate taxpayer at 45%.

The £100,000 threshold is not indexed to inflation and has been frozen since it was introduced in 2010. That freeze is why the number of people caught by it has grown so sharply: wage growth pushes more people over a line that never moves.

Why a pay rise above £100,000 barely shows up in your pay packet

Here is the mechanics, using round numbers.

Suppose you earn £100,000 and get a £2,000 rise.

1. The £2,000 is taxed at the higher rate of 40%, costing £800.
2. The rise also strips £1,000 off your personal allowance. That £1,000, which was previously tax-free, is now taxed at 40%, costing another £400.
3. National Insurance on earnings above the upper earnings limit is 2%, costing £40.

Total deductions: £1,240 from a £2,000 rise. You keep £760 - about 38%.

That is the whole trap in one paragraph. The tax on the extra income is 40%, but the hidden tax on the allowance you lose adds another 20 percentage points, giving an effective marginal rate of 60% before National Insurance, or roughly 62% once employee NI is included.

The effect is invisible on a payslip. There is no line saying "personal allowance withdrawal". Your tax code simply changes, HMRC adjusts your allowance during the year, and the deduction looks like ordinary PAYE. Most people notice only that the rise felt underwhelming.

Your real marginal rate between £100,000 and £125,140

Notice the oddity: someone earning £120,000 faces a higher marginal rate than someone earning £200,000. The tax system is not smoothly progressive here. It has a spike.

Scotland is worse. Scottish income tax rates apply to non-savings, non-dividend income, and the advanced rate of 45% applies from £75,001 to £125,140 in 2025/26. Combine that with the personal allowance taper (which is a UK-wide rule, not devolved) and the effective marginal rate in the £100,000 to £125,140 band is around 67.5%, or roughly 69.5% with National Insurance.

The other cliff edges that sit at £100,000

The 60% band is often only part of the picture. Two other rules use the same £100,000 threshold, and they are cliff edges rather than tapers - meaning you lose the benefit entirely rather than gradually.

Tax-Free Childcare. If either parent has adjusted net income above £100,000, the household loses the top-up worth up to £2,000 per child per year (£4,000 for a disabled child).

Funded childcare hours. The government-funded hours for working parents of children under school age are also withdrawn if either parent goes over £100,000.

For a household with two young children in nursery, crossing £100,000 by a few pounds can genuinely leave you worse off in cash terms than staying just below it. That is the part that surprises people most: the marginal rate on a small rise can, in specific circumstances, exceed 100%.

The High Income Child Benefit Charge is a separate issue and now applies between £60,000 and £80,000 of adjusted net income, so it bites earlier rather than at £100,000. But it is worth knowing about if your income moves through that range.

What "adjusted net income" actually means

This is the number that matters, and it is not your salary.

Adjusted net income is broadly your total taxable income from all sources - salary, bonus, benefits in kind like a company car or private medical cover, rental profits, dividends, interest, freelance income - minus certain deductions, principally:

• personal pension contributions (grossed up), and
• Gift Aid donations (grossed up).

Two consequences follow.

First, people are sometimes caught by the trap without a six-figure salary. A £92,000 salary plus a company car benefit and some savings interest can easily push adjusted net income over £100,000.

Second, and more usefully, adjusted net income is a figure you can influence. Because pension contributions and Gift Aid reduce it, they can pull income back below the threshold - and every £1 of relief in this band is worth 60p rather than the usual 40p. This is why the trap is often described as a planning opportunity as much as a problem.

Salary sacrifice, personal contributions, bonus timing, the annual allowance and its own taper for high earners, and how employer contributions interact with all of this are where the detail lives. Get the mechanics slightly wrong and you can trip the pension annual allowance taper while trying to escape the income tax taper.

Do you need to do anything?

If you are employed and your income sits comfortably below £100,000, nothing here affects you yet.

If you are near or over the threshold, three things are worth doing:

1. Work out your adjusted net income, not your salary. Include benefits in kind, interest, dividends and any side income.
2. Check whether you need to file a Self Assessment return. Many people in this band do, particularly with untaxed income or if HMRC has not adjusted the tax code accurately.
3. Check your tax code. HMRC estimates your allowance withdrawal in advance. If the estimate is wrong, you get an unexpected bill or an interest-free loan to HMRC, neither of which is ideal.

The trap is not a loophole or a mistake in the system. It is a deliberate design that has simply been left frozen long enough to catch far more people than it was ever meant to.

Want the full picture? The 60% Trap (£19) is our complete guide to the £100,000 to £125,140 band: worked examples across different income levels, the pension annual allowance taper and how to avoid triggering it, bonus sacrifice timing, the childcare cliff edges, the Scottish position, and a step-by-step checklist for calculating your own adjusted net income. It is written for people who want to understand the numbers properly rather than guess.

This article is general education about how UK tax rules work. It is not personal advice. Your circumstances, and the rules themselves, may differ - speak to a qualified adviser or accountant before acting.