The 60% tax trap: £100,000 to £125,140
Once your income passes £100,000, the UK starts taking away your tax-free Personal Allowance. The result is an effective income tax rate of 60% on income between £100,000 and £125,140, higher than the 45% top rate. Here is what it costs and how to get out of it.
How it works
Your Personal Allowance of £12,570 falls by £1 for every £2 of adjusted net income above £100,000, and is gone at £125,140. So each extra £100 you earn in this range is taxed at 40% (£40) and also turns £50 of tax-free allowance into income taxed at 40% (another £20): £60 of income tax on £100. National Insurance adds 2%, so you keep £38.
What you keep at each salary
| Salary | Personal Allowance | Take-home a year | Marginal rate | Scotland, marginal rate |
|---|---|---|---|---|
| £95,000 | £12,570 | £65,657 | 42% | 47.0% |
| £100,000 | £12,570 | £68,557 | 62% | 69.5% |
| £105,000 | £10,070 | £70,457 | 62% | 69.5% |
| £110,000 | £7,570 | £72,357 | 62% | 69.5% |
| £115,000 | £5,070 | £74,257 | 62% | 69.5% |
| £120,000 | £2,570 | £76,157 | 62% | 69.5% |
| £125,140 | £0 | £78,111 | 47% | 50.0% |
| £130,000 | £0 | £80,686 | 47% | 50.0% |
Marginal rate includes income tax and National Insurance on the next £1,000, 2026/27, no pension or student loan.
Getting out of the trap with a pension
The taper uses your adjusted net income, which is reduced by pension contributions. On a salary of £110,000, putting an extra £10,000 into your pension through salary sacrifice brings your income back to £100,000 and restores your full Personal Allowance. Your take-home pay falls by only £3,800, while £10,000 goes into your pension. Gift Aid donations reduce adjusted net income too.
Frequently asked questions
What is the 60% tax trap?
Between £100,000 and £125,140 of income, your £12,570 Personal Allowance is reduced by £1 for every £2 you earn. Each extra £1 is taxed at 40% and also removes 50p of tax-free allowance, which costs another 20p, so the effective income tax rate is 60%. With 2% National Insurance, you keep about 38p of each extra pound.
How can I avoid the 60% tax trap?
Paying more into a pension is the main way. Pension contributions through net pay or salary sacrifice, and gross contributions to a relief-at-source pension, reduce the income used for the taper. On £110,000, putting £10,000 more into a pension by salary sacrifice costs you only £3,800 of take-home pay.
Is the trap worse in Scotland?
Yes. Because the Scottish advanced rate is 45%, the effective rate in the taper is about 67.5% before National Insurance. On £110,000 in Scotland the marginal rate including National Insurance is 69.5%.
Sources: Income Tax Act 2007, section 35 (Personal Allowance taper), GOV.UK: Income Tax rates and Personal Allowances, GOV.UK: Tax on your private pension (tax relief).