The 60% Tax Trap: How Earning Between £100,000 and £125,140 Actually Works
Personal allowance taper mechanics, worked examples, and how to avoid it. 2026/27.
How the 60% trap works
The rule:
For every £2 of income above £100,000, you lose £1 of personal allowance. The allowance is fully withdrawn once your income reaches £125,140. Combined with the 40% higher-rate income tax, the effective marginal tax rate on income between £100,000 and £125,140 is 60%.
The personal allowance is the amount of income you can earn before paying any income tax. In 2026/27 it is £12,570. For incomes up to £100,000, you receive the full allowance. Above £100,000, the allowance is reduced.
Here is the maths. Suppose your income rises by £2,000 in the trap zone (say from £105,000 to £107,000). You pay 40% tax on the extra £2,000 (£800 in income tax). But you also lose £1,000 of personal allowance. That lost £1,000 of allowance means £1,000 of previously tax-free income is now taxed at 40%, adding another £400 of tax. Total tax on a £2,000 rise: £800 + £400 = £1,200. That is 60% of the £2,000 gross rise.
National Insurance at this income level is 2% (above the Upper Earnings Limit of £50,270), adding a further £40 on a £2,000 rise, bringing the total marginal deduction to £1,240 or 62% of the gross rise.
Worked examples in the trap zone
| Gross salary | Personal allowance | Income tax | NI | Take-home |
|---|---|---|---|---|
| £99,000 | £12,570 | £27,032 | £3,991 | £67,977 |
| £100,000 | £12,570 | £27,432 | £4,011 | £68,557 |
| £105,000 | £10,070 | £30,432 | £4,111 | £70,457 |
| £110,000 | £7,570 | £33,432 | £4,211 | £72,357 |
| £115,000 | £5,070 | £36,432 | £4,311 | £74,257 |
| £120,000 | £2,570 | £39,675 | £4,411 | £75,914 |
| £125,140 | £0 | £43,145 | £4,513 | £77,482 |
| £130,000 | £0 | £45,332 | £4,611 | £80,058 |
Rows highlighted pink are in the 60% trap zone. Notice that going from £100,000 to £125,140 (a gross rise of £25,140) only adds £8,925 of take-home pay. That is less than 40% of the gross rise, reflecting the high effective marginal rate throughout the zone.
How to avoid the 60% trap
Salary sacrifice pension contribution
The most widely used solution. Reducing your adjusted net income below £100,000 restores the personal allowance fully. If your salary is £110,000 and you sacrifice £10,000 into pension, your adjusted income drops to £100,000, you recover the full £12,570 personal allowance, and your income tax and NI fall significantly. The effective saving rate on the sacrifice is approximately 60%, meaning a £10,000 pension sacrifice costs you only about £4,000 in take-home pay reduction while adding £10,000 to your pension.
Gift Aid charitable donations
Donations to charity made under Gift Aid reduce your adjusted net income for the purpose of the personal allowance taper. A £5,000 Gift Aid donation reduces your adjusted net income by £6,250 (the gross equivalent of a basic-rate donation). If this brings you below £100,000, you recover personal allowance worth £2,500 in tax savings, on top of the 20% basic-rate uplift the charity receives.
Bonus sacrifice
Many employers allow you to direct a bonus into your pension via salary sacrifice. This is particularly valuable if a bonus takes you from below £100,000 into the trap zone. A £15,000 bonus on top of a £100,000 salary would otherwise be taxed at 60% effective rate. Sacrificing it into pension costs you less than £6,000 in take-home loss while adding £15,000 to your pension.
Defer variable income across tax years
If your income is variable (e.g. you have discretion over when you invoice or receive certain payments), it may be possible to defer some income to a different tax year. This requires careful planning and may not be suitable for PAYE employees, but it is a legitimate strategy for those with more control over their income timing.
Why does the government do this?
The personal allowance taper was introduced by the coalition government in 2010 as part of the policy to raise the personal allowance to £10,000 (a Liberal Democrat manifesto commitment). The taper ensures that the benefit of the higher personal allowance is gradually withdrawn for higher earners, so that those with incomes above £125,140 receive no personal allowance at all.
The Office of Tax Simplification (OTS), before it was abolished in 2023, recommended removing the taper and replacing it with a simple cliff-edge or a straightforward withdrawal mechanism. Neither the previous nor current government has implemented this change. The taper remains in place for 2026/27 and is not scheduled for reform in the current parliament.
Frequently asked questions
Why is income between £100,000 and £125,140 taxed at 60%?+-
The 60% effective rate arises from the combination of the 40% higher income tax rate and the withdrawal of the personal allowance. For every £2 of income you earn above £100,000, you lose £1 of personal allowance. Losing £1 of allowance means £1 more of your income is taxed at 40%, adding 20p of extra tax to the 40p of ordinary higher-rate tax you were already paying on the marginal pound. The total marginal deduction is 60p per £1 earned. Add the 2% NI upper rate and the effective rate reaches 62%.
How do I avoid the 60% tax trap?+-
The most effective strategy is to reduce your adjusted net income below £100,000. This is typically done through salary sacrifice pension contributions, Gift Aid charitable donations, or (for some employees) benefits in kind. If your employer allows bonus sacrifice, directing a bonus into pension is particularly efficient: the bonus is removed from your taxable income, restoring the personal allowance and avoiding the 60% marginal rate on all the income in the trap zone.
Does the 60% trap apply to Scottish taxpayers?+-
The personal allowance taper applies to all UK taxpayers, including those in Scotland. The taper mechanics are identical. However, Scottish taxpayers face a different effective marginal rate in the trap zone because the Scottish advanced rate (45%) rather than the rest-of-UK higher rate (40%) applies in much of this income range. The resulting effective rate for Scottish taxpayers in the trap zone can exceed 60%.
Is the 60% trap intentional government policy?+-
Yes. The personal allowance taper was introduced in 2010 as a way to direct the full personal allowance benefit to those on lower incomes. The policy rationale is that high earners do not need the personal allowance. Critics argue that the 60% effective marginal rate at the £100,000-£125,140 range is inefficient and creates perverse incentives (particularly through bonus sacrifice to avoid it), and that it is poorly understood by many of those affected.