If you're earning close to £100,000, you might assume that crossing it just means paying 40% tax on the extra income. In reality, the cost is much higher — and most people don't find out until they see the numbers.
What is the 60% tax trap?
Everyone in the UK gets a tax-free personal allowance of £12,570. But once your income exceeds £100,000, that allowance starts to disappear. For every £2 you earn above £100,000, you lose £1 of personal allowance.
This means that each extra pound you earn in the £100,000–£125,140 range effectively costs you:
- 40p in income tax (the higher rate)
- Plus 20p in tax on the personal allowance you've just lost
- Plus 2p in National Insurance
That's 62p gone from every additional pound — an effective marginal rate of 62%, far higher than even the 45% additional rate that kicks in at £125,140.
The personal allowance is fully withdrawn at £125,140. Above that, the marginal rate actually drops back to 47% (45% income tax + 2% NI). So someone earning £130,000 pays a lower marginal rate than someone earning £110,000.
How much does it actually cost?
Here's a comparison of three salaries in and around the trap:
| Salary | Personal allowance | Income tax | NI | Take-home | Effective rate |
|---|---|---|---|---|---|
| £100,000 | £12,570 | £27,432 | £5,514 | £67,054 | 33.0% |
| £110,000 | £7,570 | £33,432 | £5,714 | £70,854 | 35.6% |
| £125,140 | £0 | £42,518 | £6,017 | £76,605 | 38.8% |
Notice that the jump from £100,000 to £110,000 — an extra £10,000 gross — only puts £3,800 more in your pocket. That's because £6,200 of the increase goes to tax and NI. On a straight 40% plus 2% rate, you'd expect to keep £5,800 of that £10,000. The missing £2,000 is the cost of losing £5,000 of personal allowance.
How to avoid the 60% trap
The most effective strategies all work the same way: they reduce your "adjusted net income" back to £100,000 or below, restoring the full personal allowance.
Pension contributions via salary sacrifice. If your employer offers salary sacrifice, contributions above your normal amount reduce your gross pay before tax and NI. Sacrificing £10,000 when you earn £110,000 brings your adjusted income to £100,000, restores the full personal allowance, and saves you roughly £6,200 in tax and NI — on top of the pension contribution itself. The money isn't lost; it's in your pension growing tax-free.
Pension contributions via relief at source. If you pay into a personal pension (like a SIPP), you can claim higher-rate relief through self-assessment. The effect on your adjusted net income is the same, though you won't save the NI that salary sacrifice avoids.
Charitable donations via Gift Aid. Gift Aid donations extend your basic rate band and reduce your adjusted net income. If you're planning significant charitable giving, timing it to fall in the right tax year can restore personal allowance.
Timing bonuses. If your employer has flexibility on when bonuses are paid, shifting a bonus from one tax year to another can keep both years below the £100,000 threshold. This only works if your base salary is below £100,000.
The most common solution is to increase pension contributions so that adjusted net income falls to £100,000 or below, restoring the full personal allowance. For many people in this income range, the pension contribution effectively costs nothing after tax relief.
A worked example
Sarah earns £115,000. Without any planning, her personal allowance is reduced to £5,070 (she loses £7,500 of allowance because she's £15,000 over the £100,000 threshold). She pays £36,432 in income tax and £5,814 in NI, taking home £72,754.
If Sarah sacrifices £15,000 into her pension via salary sacrifice, her adjusted income drops to £100,000. Her full personal allowance is restored. She now pays £27,432 in income tax and £4,314 in NI on the remaining £100,000, taking home £68,254 in cash — plus £15,000 in her pension.
The total value to Sarah: £68,254 + £15,000 = £83,254 vs £72,754. That pension contribution effectively cost her nothing — she's £10,500 better off in total.
Does this affect Scottish taxpayers?
The personal allowance taper applies across the whole UK — it's set by Westminster, not the devolved governments. So Scottish taxpayers face the same loss of personal allowance above £100,000.
However, Scotland has different income tax rates (42% higher rate, 45% advanced rate, 48% top rate), so the precise marginal rate in the £100,000–£125,140 band differs slightly. The principle and the planning strategies are the same.
This article covers England, Wales and Northern Ireland tax rates. Scottish taxpayers have different income tax bands but the personal allowance taper works the same way.