Answers · UK 2025/26

What is the 60% tax trap?

The 60% tax trap is the effective marginal rate paid on income between £100,000 and £125,140 in 2026/27. As your Personal Allowance is withdrawn by £1 for every £2 earned over £100,000, each extra £1 of salary in this band is taxed at an effective 60%.

Last updated: 1 June 2026Last reviewed: 1 June 2026How we verify

Full answer

The 60% tax trap applies to taxable income between £100,000 and £125,140 in 2026/27. Once your adjusted net income exceeds £100,000, HMRC removes your £12,570 Personal Allowance at a rate of £1 for every £2 above £100,000. The allowance is fully gone by £125,140. Inside this band you pay 40% higher-rate tax on the extra income and you also lose tax-free allowance, which is itself taxed at 40%, producing an effective marginal rate of 60% (plus 2% National Insurance, so 62% in cash terms). Worked example: if you earn £110,000 and receive a £2,000 pay rise to £112,000, you pay £800 in higher-rate tax on the £2,000 (40%), and you lose £1,000 of Personal Allowance, which adds another £400 of tax — so £1,200 of the £2,000 disappears, leaving just £760 after the 2% NI. This is why bonuses, rental income or dividends pushing you over £100,000 can feel punishing. In Scotland the trap is even steeper because the Scottish higher rate is 42% and an advanced rate of 45% applies, so the effective rate can exceed 60%. The most common fix is to make pension contributions or charitable Gift Aid donations, which reduce adjusted net income and restore some or all of the allowance. Use the Income Tax calculator to see exactly where you sit on the band.