What is the 60% Tax Trap?
The 60% tax trap is an anomaly in UK income tax where earners between £100,000 and £125,140 face an effective marginal rate of 60p in every extra pound — despite the nominal higher rate being 40%. It occurs because of the Personal Allowance taper.
Your tax-free Personal Allowance (£12,570 in 2026/27) starts being withdrawn at the rate of £1 for every £2 you earn above £100,000. By £125,140, the allowance is completely gone. This effectively creates a hidden 20% additional tax on top of the 40% higher rate.
The trap in one sentence
For every £2 you earn between £100,000 and £125,140, you lose £1 of Personal Allowance. That lost £1 becomes taxable at 40% — so effectively 20p extra per £2 earned, on top of the 40% = 60% total marginal rate.
The Maths Explained
Let's walk through what happens when you earn £101,000 instead of £100,000 — an extra £1,000:
- You pay 40% tax on the £1,000 = £400
- Your income is £1,000 above £100,000, so your Personal Allowance is reduced by £500
- That £500 of previously tax-free income now gets taxed at 40% = £200 extra tax
- Total tax on the extra £1,000 = £400 + £200 = £600 = 60%
2026/27 Effective Marginal Rates by Income
| Income Band | Nominal Rate | Effective Marginal Rate | Includes NI? |
|---|---|---|---|
| Up to £12,570 | 0% | 0% | 0% |
| £12,571–£50,270 | 20% | 20% | +8% NI = 28% |
| £50,271–£100,000 | 40% | 40% | +2% NI = 42% |
| £100,001–£125,140 | 40% | 60% (PA taper) | +2% NI = 62% |
| Above £125,140 | 45% | 45% | +2% NI = 47% |
Note that NI is also payable at 2% above £50,270 (the Upper Earnings Limit), making the true effective rate 62% in the trap zone when NI is included.
Who Is Affected?
You are in the trap if your adjusted net income falls between £100,000 and £125,140. Adjusted net income is your gross income minus gift aid donations and personal pension contributions (but not salary sacrifice, which reduces gross before this calculation).
Common situations where people unexpectedly fall into the trap:
- A salary of £95,000 plus a bonus pushing total pay to £105,000
- A £90,000 salary with significant rental income or dividends
- A mid-year pay rise crossing £100,000 part-way through the year
- HMRC estimates suggest around 900,000 UK taxpayers are caught in this band annually
How to Escape the Trap
The goal is to reduce your adjusted net income below £100,000. There are two main legal routes:
1. Pension Salary Sacrifice
This is the most powerful tool. Salary sacrifice directly reduces your gross pay before income tax is calculated, bringing your taxable income back below £100,000 and restoring your full Personal Allowance.
Example: £110,000 salary, sacrifice £10,000 into pension
This means £10,000 going into your pension pot costs you only £4,000 in reduced take-home pay — because every pound sacrificed in the trap zone saves 60p in tax.
2. Gift Aid Donations to Charity
Gift Aid donations also reduce your adjusted net income. If you donate £800 to charity under Gift Aid, HMRC grosses it up to £1,000 — and that £1,000 is deducted from your adjusted net income. For an £800 donation in the 60% zone, you effectively save £600 in tax (60% of £1,000), meaning the charity receives £1,000 and it costs you just £200 net.
Full Worked Example: £115,000 Salary
Without any sacrifice (2026/27)
With £15,000 pension salary sacrifice
Model your own scenario
Use the take-home pay calculator, enter your salary, and adjust the pension salary sacrifice slider to see exactly when your Personal Allowance is restored and your tax bill drops.
Sources
HMRC Income Tax rates and Personal Allowances 2026/27 · GOV.UK. For guidance only — not financial or tax advice. Consult a qualified adviser for your personal situation.