If you earn between £100,000 and £125,140, you are losing 60p of every extra pound to tax. Here is how it works — and how to escape it.
The 60% tax trap is the unofficial name for the effective 60% marginal tax rate that hits UK earners between £100,000 and £125,140. It exists because of the personal allowance taper: for every £2 you earn above £100,000, you lose £1 of your £12,570 personal allowance.
This means that in addition to paying 40% income tax on each extra pound, you also lose tax-free allowance worth an extra 20%. The combined effect is a 60% marginal rate — you keep only 40p from every extra pound earned in this band.
Add National Insurance at 2% and the effective rate rises to 62%. This makes the £100k–£125k band the most punishing income range in the entire UK tax system — worse than the 45% additional rate that applies above £125,140.
Anyone with adjusted net income between £100,000 and £125,140 is caught in the trap. This includes employed salary, self-employment profits, rental income, dividends, and most other taxable income combined.
HMRC data shows roughly 700,000 UK taxpayers fall into this income band. Many do not realise they are paying an effective 60% rate because it does not appear as a named tax band on payslips or tax returns — it is a hidden consequence of the allowance taper.
Every UK taxpayer gets a tax-free personal allowance of £12,570 (2025/26). You pay no income tax on this amount. But once your adjusted net income exceeds £100,000, HMRC reduces your allowance by £1 for every £2 over the threshold.
By the time you reach £125,140 (that is £100,000 + 2 × £12,570), your personal allowance has been reduced to zero. Every pound of income above £125,140 is taxed at 40% or 45% — but without the extra taper penalty.
Worked example: You earn £110,000. Your income exceeds £100,000 by £10,000, so your personal allowance is reduced by £5,000 (half of £10,000) — from £12,570 to £7,570. The £5,000 of income that was previously tax-free is now taxed at 40%, costing you an extra £2,000 in tax.
The most effective strategy is to reduce your adjusted net income below £100,000. HMRC allows several deductions that count:
Personal pension contributions (including SIPP) are deducted from your adjusted net income. If you earn £120,000 and contribute £20,000 to your pension, your adjusted net income drops to £100,000 — fully restoring your personal allowance. The effective tax relief on that £20,000 is 60%, making it one of the most powerful tax savings in the UK.
You can contribute up to £60,000 per year (or 100% of your earnings, whichever is lower) and carry forward unused allowance from the previous three tax years.
If your employer offers salary sacrifice for pension, the contribution is deducted before income tax and National Insurance are calculated. This means you save NI on top of the 60% income tax benefit — potentially saving 62% or more on each pound sacrificed. See our full salary sacrifice guide for a worked example.
Charitable donations made with Gift Aid extend your basic rate band and reduce your adjusted net income. If you donate £5,000 (grossed up to £6,250 with Gift Aid), your adjusted net income drops by £6,250.
This makes charitable giving exceptionally tax-efficient in the 60% trap window — you effectively get 60% relief on the gross donation amount.