⚡ What is the UK 60% Tax Trap? (Quick Answer)
The 60% tax trap affects UK earners with income between £100,000 and £125,140. For every £2 earned above £100,000, your tax-free Personal Allowance (£12,570) is reduced by £1. Combined with 40% Higher Rate Tax and 2% National Insurance, this creates an effective marginal deduction rate of 62% on earnings in this bracket. Making pension contributions or salary sacrifice reclaims your full £12,570 allowance.
| Income Level | Personal Allowance | Marginal Rate | Effective Pension Relief | Childcare Subsidies |
|---|---|---|---|---|
| £100,000 (Baseline) | £12,570 (100%) | 42% (40% IT + 2% NI) | 40% Higher Rate | 100% Eligible |
| £110,000 (Inside Trap) | £7,570 (Lost £5,000) | 62% (60% IT + 2% NI) | 60% Effective Relief | £0 (Cliff-Edge Lost) |
| £125,140+ (Full Taper) | £0 (100% Lost) | 47% (45% IT + 2% NI) | 45% Additional Rate | £0 (Cliff-Edge Lost) |
Personal Allowance Taper & 60% Tax Model
What is the UK 60% Marginal Tax Trap?
In the UK, the standard Personal Allowance is £12,570. For every £2 of adjusted net income earned above £100,000, your tax-free allowance is reduced by £1, disappearing entirely once income reaches £125,140.
Because higher earners pay 40% income tax on income over £100,000 plus an extra 20% effective tax from the withdrawn allowance, each additional £100 earned in this band incurs £60 in tax (an effective 60% marginal rate, or 62% including 2% Employee National Insurance).
How Does the Personal Allowance Taper Schedule Work?
The table below shows how the statutory £12,570 Personal Allowance diminishes across adjusted net income levels between £100,000 and £125,140 for 2026/27.
| Gross Adjusted Income | Allowance Lost | Personal Allowance Retained | Effective Marginal Rate |
|---|---|---|---|
| £100,000 | £0 | £12,570 (100%) | 40% (+ 2% NI) |
| £105,000 | £2,500 | £10,070 | 60% (+ 2% NI) |
| £110,000 | £5,000 | £7,570 | 60% (+ 2% NI) |
| £120,000 | £10,000 | £2,570 | 60% (+ 2% NI) |
| £125,140+ | £12,570 | £0 (Fully Lost) | 45% Additional Rate |
How Can You Beat the 60% Tax Trap with Pension Contributions?
By making workplace pension contributions (via salary sacrifice) or private payments into a SIPP, you reduce your Adjusted Net Income back below £100,000. This action fully restores your £12,570 Personal Allowance, giving you an effective 60% tax relief on the contributed amount.
Frequently Asked Questions
The 60% tax trap is an effective marginal tax rate on income between £100,000 and £125,140 caused by losing £1 of Personal Allowance for every £2 earned over £100k, adding 20% effective tax to the 40% Higher Rate.
Making pension contributions via salary sacrifice or SIPP reduces your adjusted net income below £100,000. This fully restores your £12,570 Personal Allowance and yields an effective 60% tax relief on your contribution.
The Personal Allowance is completely eliminated once your adjusted net income reaches £125,140, as the full £12,570 allowance is tapered away at £1 per £2 of earnings over £100,000.
Rates and calculations on this page are cross-referenced with official UK Government legislation: GOV.UK Income Over £100,000 & Personal Allowance Reduction (2026/27).