Glossary · UK
What is 60% Tax Trap?
The effective 60% marginal tax rate on income between £100,000 and £125,140 caused by the Personal Allowance taper.
Full Definition
The «60% tax trap» is the punitive marginal rate that applies to income between £100,000 and £125,140 in 2025/26. For every £2 earned over £100,000 you lose £1 of Personal Allowance, so an extra £1 of income is taxed at 40% and also makes 50p of previously tax-free allowance taxable at 40% — an effective marginal Income Tax rate of 60% (around 62% once 2% employee NI is added). At £125,140 the allowance is fully gone. The classic way to escape it is to make pension contributions or Gift Aid donations, which reduce adjusted net income pound for pound and restore the lost allowance — meaning relief on those contributions can effectively reach 60%. Bonus sacrifice and salary sacrifice are common tactics for those near £100,000.