Answers · UK 2025/26
What is the 60% tax trap in the UK?
The "60% tax trap" is the effective marginal tax rate on income between £100,000 and £125,140. Personal Allowance withdraws at £1 per £2 above £100k, creating an effective 60% rate (40% Income Tax + 20% lost PA). Pension contributions can avoid this.
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UK 60% tax trap explained 2025/26. Mechanism: above £100,000 adjusted net income, your £12,570 PA reduces by £1 per £2 of additional income. Fully gone at £125,140. So £1 of extra income loses 50p PA, taxed at 40% = 20p extra tax — on top of the 40p already due. Net 60p tax per £1, plus 2% NI = 62% effective marginal rate. Worse: lose Tax-Free Childcare above £100k. Plan 2 student loan adds 9% (71% marginal). Workarounds: pension contribution (salary sacrifice or personal) reduces adjusted income; £25,140 contribution drops you to £100k, recovers full PA, saving £5,028 tax. Net cost of £25k pension: only ~£10k. Charity Gift Aid also reduces adjusted income.
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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.