The 60% Tax Trap: Earning Over £100,000

The "60% tax trap" appears on no HMRC rate card, which is part of why it catches people out. Between £100,000 and £125,140 of income, every extra pound is taxed at an effective 60%, not the 40% the tables show, because your personal allowanceThe amount of income you can earn each year before income tax. It is £12,570 for 2026/27, tapering away by £1 for every £2 of income over £100,000. is being withdrawn as you earn across the band. Most guides explain that one sentence and stop. The parts that actually change what people do sit underneath it: the childcare cliff at exactly £100,000, what the pension escape really costs, and the April 2029 change that most of the internet has read the wrong way round.

What the 60% Tax Trap Actually Is

The personal allowance is the slice of income that is normally tax-free - £12,570 in 2026/27. Once your adjusted net incomeYour total taxable income for the year, less grossed-up pension contributions and Gift Aid donations. It is the figure that decides the personal-allowance taper, the childcare thresholds and the High Income Child Benefit Charge. passes £100,000, that allowance is cut by £1 for every £2 you earn above the threshold. It reaches zero at £125,140 - that is £100,000 plus twice the allowance. The one-for-two taper is set in statute, in section 35 of the Income Tax Act 2007.

Here is why that lands at 60%. On each extra £1,000 you earn in the band you pay the usual 40% higher rate. But you also lose £500 of allowance, and that £500, previously tax-free, is now taxed at 40% too. Two lots of 40% on the same £1,000 is an effective 60%. Add 2% employee National Insurance and it is 62%. The chart shows the shape of it.

Above £125,140 there is no allowance left to lose, so the marginal rateThe rate of tax on your next pound of income - your Income Tax band plus, for the self-employed, Class 4 National Insurance. It is what a £1 deduction actually saves you. drops to the 45% additional rate. That is the counter-intuitive part: the highest marginal income-tax rate on this page is not at the top of the scale, it is in the middle.

The Thresholds Stack - and the Cliff at £100,000 Is the Brutal One

The 60% band is a taper: a gradient you climb. The thresholds around it are cliff edges, and they do more damage. Below the trap, the High Income Child Benefit ChargeHigh Income Child Benefit Charge: A tax charge that claws back Child Benefit once one partner's adjusted net income passes £60,000. It is 1% of the benefit for every £200 above £60,000, so the benefit is fully withdrawn at £80,000. already claws back Child Benefit between £60,000 and £80,000 of adjusted net income - 1% of the benefit for every £200 above £60,000, fully gone at £80,000. The planned move to a household basis was dropped, so it stays an individual test.

Then comes the hard edge. Cross £100,000 of adjusted net income by a single pound and a parent of young children loses two things outright: the funded early-years hours for working parents (30 hours a week in term time), and Tax-Free Childcare, the government top-up worth up to £2,000 per child a year. There is no taper on these. They are gone the moment you cross the line. And the test is per parent - if one parent is over £100,000, the household loses both, even if the other earns very little. This, not the tax rate, is what has people talking about passing on the promotion.

One Extra Pound Over £100,000, Worked

Take a higher-rate taxpayer on £100,000 who is offered a £1,000 rise, on rest-of-UK rates. The income tax on that £1,000 at 40% is £400. On top of it, the personal allowance falls by £500, and taxing that recovered £500 at 40% adds £200. Total income tax on the £1,000 is £600, leaving £400 - an effective 60%. Add 2% employee National Insurance and £620 of the £1,000 is taken in tax and NI. The rise is still worth having in cash terms; it simply grows far slower than the headline figure suggests.

The Escape: Cut Your Adjusted Net Income

The trap is defined on adjusted net income, and pension contributions reduce it. Pay into a pension - through salary sacrificeAn arrangement where you give up part of your salary in return for a benefit such as a pension contribution. The sacrificed amount is not taxed as income, so it also lowers your adjusted net income. or relief at source - and the same contribution that builds your retirement also pulls you back down the band, or under £100,000 altogether.

Put £10,000 into a pension from inside the band and you save £6,000 of income tax, because that slice was being taxed at 60%. You keep 40p of every pound in this band, so the contribution costs you 40p in the pound of take-home while the full £10,000 still lands in your pension. If you also have young children and the contribution takes you back under £100,000, it restores the funded hours and Tax-Free Childcare on top - frequently worth more than the tax saving itself.

Will the April 2029 Salary-Sacrifice Change Close the Escape? No.

This is the part almost everyone has backwards. From 6 April 2029, only the first £2,000 a year you sacrifice into a pension keeps its National Insurance saving; sacrifice above £2,000 loses the NI break for you and your employer. The change is real and it is law - the National Insurance Contributions (Employer Pensions Contributions) Act 2026 sets the £2,000 limit and takes effect from 6 April 2029.

But look at what it touches. The Act amends National Insurance law only. It does nothing to income-tax relief on pension contributions - and that relief is what restores your personal allowance and springs the 60% trap. So after April 2029 a pension contribution still reduces your adjusted net income, still restores the allowance, and still saves you the 60%. What you lose above £2,000 of sacrifice is the National Insurance saving, a couple of percent, not the headline relief. The people rushing to front-load "before it is all taxed in 2029" are guarding against the wrong thing for this particular trap.

Should You Refuse a Pay Rise or Bonus?

On the tax alone, almost never. Even in the worst band you keep 40p of every extra pound - a smaller share than usual, but still more money than before. A rise that takes you into the 60% band does not leave you worse off in cash terms; it just grows more slowly than the headline number. Refusing it "to dodge the tax" is, on the income tax by itself, the wrong call.

The childcare cliff changes that answer, and only for a specific group. Picture a parent of young children in nursery earning £101,000. The tax on the £1,000 over £100,000 is £600, so £400 of it still reaches them - no loss on tax. But if crossing £100,000 also costs the funded hours and up to £2,000 per child of Tax-Free Childcare, the childcare loss can dwarf a modest rise or bonus. This is the one case where sacrificing enough into a pension to stay under £100,000 can genuinely leave you better off. Check your own numbers below before deciding either way.

Three "Traps", One Conversation - Which Is Which

Online threads blur three different thresholds into one. They are not the same, and only the first is the subject of this guide.

Does the 60% Trap Apply in Scotland?

Yes, and it bites a little harder. The personal allowance and its taper are set UK-wide, so a Scottish taxpayer loses the same £12,570 in the same way over £100,000. But the income-tax rate that applies in the band is Scottish, and the band sits in the advanced-rate zone rather than the 40% higher rate. Run through the engine, the effective marginal rate across the £100,000 to £125,140 band in Scotland is 67.5%, or 69.5% once you add 2% National Insurance. Same trap, a steeper wall.

Sources: Income Tax Act 2007 s35 (the personal-allowance taper); GOV.UK adjusted net income; GOV.UK Tax-Free Childcare and free childcare if you are working; GOV.UK High Income Child Benefit Charge; the National Insurance Contributions (Employer Pensions Contributions) Act 2026. Effective rates and worked examples are computed with the UKFT tax engine on 2026/27 figures.