Answers · UK 2025/26
What is the 60% effective tax rate UK?
The 60% effective tax rate is the marginal rate that applies to income between £100,000 and £125,140 in 2025/26. The Personal Allowance tapers by £1 for every £2 of income over £100,000, so an extra £1 of pay loses 50p of allowance — costing 40p tax on the £1 plus 20p tax on the lost 50p of allowance.
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The 60% trap is one of the most punitive marginal rates in the UK. Mechanism: above £100,000 of adjusted net income, the £12,570 Personal Allowance reduces by £1 for every £2 over £100,000, fully extinguishing at £125,140. Every extra £1 in this band is taxed at 40% directly, and an additional 50p of previously tax-free income now becomes taxable at 40% — so £1 of gross income generates 40p + 20p = 60p of extra tax, plus 2p NI = 62% total. On a £25,140 slice that is over £15,000 in tax. Mitigation strategies: (1) pension contributions, made via salary sacrifice or with higher-rate relief claimed, reduce adjusted net income pound-for-pound — £25,140 into pension restores the full allowance and saves up to £15,000; (2) Gift Aid charitable donations also reduce adjusted net income; (3) salary sacrifice into childcare vouchers, cycle-to-work or EV company cars. Plan ahead: HMRC measures adjusted net income at year-end, so contributions made by 5 April count.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.