The 60% Tax Trap, Explained

There is no 60% tax band in the UK — officially. But between £100,000 and £125,140, the way the Personal Allowance is withdrawn creates exactly that effect, and it catches more people every year as salaries rise while the threshold stays frozen.

How it works

For every £2 you earn above £100,000, you lose £1 of Personal Allowance. Earning an extra £100 therefore does two things: the £100 itself is taxed at 40%, and the £50 of allowance you lost means £50 more of your other income is taxed at 40% too — another £20. Total tax on that £100: £60, plus 2% National Insurance. An effective rate of 62%.

A worked example: £110,000

On £110,000 in 2026/27 the allowance has fallen to £7,570. Income tax is £33,432.00, National Insurance £4,210.60, and take-home is £72,357.40. Compare a £100,000 salary, which keeps its full allowance: the extra £10,000 of gross pay adds far less than £6,000 of take-home.

The pension escape hatch

The taper is based on income after pension contributions. Contributing £10,000 of a £110,000 salary into a pension brings adjusted income back to £100,000 and restores the full £12,570 allowance. On the same £110,000 salary with that contribution, take-home becomes £68,357.40 — you keep £10,000 in your pension while giving up only about £4,000.00 of take-home pay. Salary sacrifice achieves the same and saves National Insurance too. Run your own figures in the pension calculator.

This guide explains the mechanics; whether contributing more is right for you depends on your circumstances, pension allowances and plans. Consider regulated financial advice for large decisions.