The 60% tax trap hits earnings between £100,000 and £125,140. For every £2 you earn over £100,000 you lose £1 of your tax-free Personal Allowance, so that slice of income is effectively taxed at around 60%. Pension contributions are the main way to escape it.
The short answer
- The 60% trap applies to income between £100,000 and £125,140.
- You lose £1 of Personal Allowance for every £2 of income above £100,000.
- That withdrawal makes the effective marginal rate on the band around 60%.
The “60% tax trap” is one of the strangest features of the UK Income Tax system: a band where you can be worse off, pound for pound, than someone earning far more. It catches a growing number of professionals as salaries drift past six figures, yet it appears nowhere on a payslip. Understanding it is the first step to reducing your tax bill.
Why the trap exists
Everyone starts with a £12,570 Personal Allowance: the amount you can earn before any Income Tax applies. But once your adjusted net income passes £100,000, that allowance is withdrawn at a rate of £1 for every £2 you earn above the threshold. By the time you reach £125,140 the entire £12,570 has gone. Losing the allowance means an extra slice of your income, which was previously tax-free, is now taxed at 40%, on top of the 40% you already pay on the earnings themselves. The result is a distortion that most people never notice until they see the effective rate laid out in numbers.
The maths behind 60%
Consider an extra £100 earned just above £100,000. You pay £40 in higher-rate tax on it. But that £100 also strips away £50 of Personal Allowance, and that £50 is now taxed at 40% too, costing another £20. So £100 of income triggers £60 of tax, an effective marginal rate of 60%. The table below shows how the band compares with the headline rates.
Effective marginal tax rates (2026, rest of UK)
| Income band | Headline rate | Effective rate |
|---|---|---|
| £12,571 – £50,270 | Basic 20% | 20% |
| £50,271 – £100,000 | Higher 40% | 40% |
| £100,001 – £125,140 | Higher 40% + allowance taper | ≈ 60% |
| Over £125,140 | Additional 45% | 45% |
The oddity is plain: income in the £100k–£125k band is taxed more heavily than income above it. Add the loss of tax-free childcare and the 15 or 30 free childcare hours (both cut off at £100,000 adjusted net income per parent) and the real cost for working families can be extraordinary. A parent of two young children in nursery who nudges over £100,000 can lose thousands of pounds of childcare support on top of the extra tax, producing an effective rate that in some cases exceeds 100% on the income just above the threshold. It is genuinely possible to take home less after a pay rise.
Who gets caught
Because the £100,000 threshold has been fixed since 2010, while wages have climbed, the trap now catches far more people than it was ever designed to, senior managers, doctors, IT professionals and anyone with a good salary plus a bonus. Adjusted net income is the test, and it includes not just salary but bonuses, taxable benefits such as a company car, rental profits, dividends and savings interest. Someone on a £95,000 salary with a modest buy-to-let and a bonus can easily find themselves inside the zone without thinking of themselves as a very high earner at all. The frozen threshold means the problem grows every year.
How to escape the trap
The trap is defined by adjusted net income, and the most effective way to reduce that figure is a pension contribution. Paying enough into your pension to bring adjusted net income back to £100,000 not only avoids the 60% zone: it means the contribution itself effectively receives around 60% tax relief, because you reclaim the higher-rate relief and restore your Personal Allowance at the same time. Salary sacrifice and Gift Aid donations work in the same way. We cover the practical steps in how to avoid losing your Personal Allowance.
Do nothing
- £10,000 earned between £100k and £125k
- £6,000 lost to tax (60% effective)
- Only £4,000 reaches your pocket
- Personal Allowance fully or partly lost
Redirect it to your pension
- £10,000 paid into your pension
- Adjusted net income falls back toward £100k
- Allowance restored; ~60% effective relief
- £10,000 working for your retirement
Because the numbers are unusually favourable in this band, high earners often find pension funding here is the best-value move in the whole tax system. One thing to watch is the pension annual allowance, capped at £60,000 for most people, which limits how much you can contribute with tax relief in a year; unused allowance from the previous three tax years can sometimes be carried forward if you have the earnings to support it. Very high earners may also face a tapered annual allowance, so the amount you can pay in needs checking before you commit.
This is general information rather than personal advice, and the right amount depends on your other income and pension allowances. Investments held within a pension can fall as well as rise. A vetted, FCA-regulated adviser sourced through Vetted Wealth can run the figures for your situation, entirely free to you.
In summary
- The 60% trap applies to income between £100,000 and £125,140.
- You lose £1 of Personal Allowance for every £2 of income above £100,000.
- That withdrawal makes the effective marginal rate on the band around 60%.
- Pension contributions, salary sacrifice and Gift Aid reduce adjusted net income and can escape it.
- Funding a pension in this band can attract roughly 60% effective tax relief.
Sources and further reading
- Income Tax rates and allowances GOV.UK
- Capital Gains Tax GOV.UK
- Self Assessment GOV.UK
Read the full guide
For the complete picture, see our in-depth guide: The 60% Tax Trap Explained.
Speak to a vetted tax planning specialist
This is free information, not personal advice. When you’re ready, we’ll match you with an independently vetted, FCA-regulated specialist, free, and with no obligation.
