The "60% tax trap" is the unusually high effective tax rate that many UK higher earners hit on income between £100,000 and £125,140. There is no 60% band in the tax tables — the rate appears because, once your income passes £100,000, you pay 40% tax on the extra money and start losing your tax-free Personal Allowance at the same time. This guide explains how that works for the 2026/27 tax year (6 April 2026 to 5 April 2027) and the legitimate ways some people reduce the income figure that triggers it.
What is the 60% tax trap?
The 60% tax trap is a marginal Income Tax effect, not an HMRC band. It kicks in when your adjusted net income — broadly, your total taxable income after certain deductions, explained below — rises above £100,000.
Above that point, two things happen to the next slice of income. The 40% higher tax rate continues to apply (which starts from earnings over £50,270), but you also start to lose part of your Personal Allowance, the £12,570 you'd normally earn tax-free. Losing the allowance means more of your income becomes taxable, so each extra pound carries its own tax plus the knock-on effect of the allowance reduction.
Put together, for every extra £2 you earn in this band you typically pay £1.20 in Income Tax. That's a 60% marginal rate on the slice between £100,000 and £125,140. It doesn't apply to all your income — only to the part that falls inside that range.
The chart shows the oddity at the heart of the trap: the marginal rate climbs to 60% in the taper band and then falls back to 45% once the allowance is fully gone. For a stretch of income, the tax system takes more of each extra pound than it does from someone earning more than £125,140.
Why does it happen between £100,000 and £125,140?
The mechanism is the Personal Allowance taper. The standard Personal Allowance for 2026/27 is £12,570. Once your adjusted net income goes above £100,000, that allowance is reduced by £1 for every £2 of income over the limit. Work the maths through and the allowance reaches zero at £125,140 — that's £100,000 plus the £25,140 of income it takes to remove all £12,570 (because you lose £1 for every £2).
Here's the £2 example in full. Earn £2 more than £100,000 and you pay 40% on it — that's £0.80. But you also lose £1 of Personal Allowance, and that £1 is now taxable at 40% too, adding £0.40. So £2 of extra income produces £1.20 of extra tax. £1.20 out of £2 is 60%.
The table shows how the allowance shrinks as adjusted net income rises.
| Adjusted net income | Personal Allowance remaining | Marginal Income Tax rate on the next pound |
|---|---|---|
| £100,000 | £12,570 (full) | 40% |
| £110,000 | £7,570 | 60% |
| £120,000 | £2,570 | 60% |
| £125,140 | £0 | 60% up to here, then 45% above |
So the trap isn't a separate tax. It's the combination of paying higher-rate tax and losing tax-free allowance over the same band of income.
What income figure does HMRC use?
This is the part people most often miss. The £100,000 line is measured against your adjusted net income, not your salary alone.
Adjusted net income starts with your total taxable income — employment earnings, self-employed profits, rental income, savings interest, dividends and most other taxable income added together — before your Personal Allowance is taken off. You then make a few specific deductions, the main two being grossed-up pension contributions that had relief at source and grossed-up Gift Aid donations. The result is the figure HMRC uses to decide whether your allowance is tapered.
Two points follow from this. First, someone on a £95,000 salary can still be caught if a bonus, some dividends or rental profit pushes the total over £100,000. Second, two people with the same salary can have very different adjusted net income depending on their pension contributions and other income.
Is the rate really 60%?
60% is an accurate label for the marginal Income Tax on most non-dividend income in the taper band — but it can understate what you actually lose on the next pound.
Add National Insurance. Employees pay Class 1 National Insurance at 2% on earnings above £50,270 in 2026/27, so an employee whose pay falls in the taper band usually pays that 2% on top, taking the combined marginal deduction on earnings to 62%. Self-employed people pay Class 4 National Insurance at 2% above the same point, with a similar effect. The salary calculator can show how Income Tax and National Insurance stack up on a given salary.
Dividends behave differently. Dividend income has its own set of tax rates which are lower than the rates on earnings, and no National Insurance is charged. The marginal effect of the taper on dividends is therefore not the same 60% figure, though the loss of Personal Allowance still applies.
It's only the slice that's affected. The high rate applies to income inside the £100,000–£125,140 band, not to your whole income. Below £100,000 you're on the normal rates, and above £125,140 the marginal Income Tax rate drops back to 45% because there's no allowance left to lose.
Does the 60% tax trap apply in Scotland?
Yes, but the exact rate is different. The Personal Allowance and its taper are set UK-wide, so a Scottish taxpayer also loses £1 of allowance for every £2 of adjusted net income over £100,000.
What differs is the rate applied to the income on top. Scotland sets its own rates and bands for earned income (non-savings, non-dividend income). In 2026/27 the relevant Scottish rates across the £100,000–£125,140 range are the advanced rate of 45% up to £125,140 and the top rate of 48% above it. Because a Scottish taxpayer in this band is paying tax at 45% rather than 40%, both the tax on the extra income and the tax on the lost allowance are higher — so the marginal Income Tax rate in the taper band is steeper than 60%.
Savings and dividends. Scottish rates apply to earned income, but savings interest and dividends are taxed at the same rates across the UK. The picture for a Scottish taxpayer therefore depends on the mix of income.
Can pension contributions or Gift Aid help?
The personal allowance taper is triggered by adjusted net income so reducing that figure can save some of your earnings from being taxed at the 60% rate. The two main ways to do this are pension contributions and Gift Aid donations.
Relief-at-source pension contributions. A personal or workplace pension contribution paid from after tax income is grossed up — for every £1 you pay in, £1.25 comes off your adjusted net income. So a £4,000 contribution becomes £5,000 gross and reduces adjusted net income by £5,000. Someone with adjusted net income of £105,000 who pays £4,000 into such a pension brings the figure down to £100,000, restoring the Personal Allowance they were losing. That's on top of the ordinary tax relief on the contribution.
Salary sacrifice works differently. With salary sacrifice you give up contractual salary and your employer pays into your pension instead, so your gross pay is lower from the start. That can also keep adjusted net income down. The salary sacrifice pension calculator shows the effect of contributions to the different types of pension schemes, and how pension tax relief works in the UK explains the different methods in detail.
Gift Aid donations. Gift Aid donations are grossed up in the same way — £1 donated reduces adjusted net income by £1.25 — so charitable giving can also bring the figure down.
These are broad planning concepts but there are other things to consider with pension contributions, for example the annual allowance and the tapered annual allowance, both of which can limit how much you can pay in tax-efficiently. The right approach depends on your earnings, your existing pensions and your contribution history so you should always check with your financial advisor before making any decisions.
What situations catch people out?
Anything that adds to adjusted net income could push you into the 60% zone if your normal salary is already close to the £100,000 mark:
- A bonus, commission or overtime that lifts a salary just under £100,000 over the line.
- Share awards or vesting that count as taxable income in the year.
- Dividends from your own company or an investment portfolio.
- Rental profit from a let property.
- Savings interest above your savings allowance.
- A one-off chunk of self-employed income in a busy year.
- Taxable benefits in kind, such as a company car, which add to your taxable income.
The PAYE system can also lag behind. If HMRC doesn't yet know your income will cross £100,000 — for example because a large bonus lands late in the year — your tax code may not reflect the tapered allowance, and the shortfall surfaces later. The salary calculator is a useful way to sense-check how a bonus changes your position before it's paid.
How does HMRC collect the tax?
How the extra tax reaches HMRC depends on your situation.
Through your tax code. For employees, HMRC often reflects a reduced Personal Allowance in your tax code, so the right amount is deducted through PAYE across the year. If your income changes, the code can be updated, sometimes leaving an under- or over-payment to settle. You can review your estimated income and code using GOV.UK's check your Income Tax service.
Through Self Assessment. If you have income that isn't fully taxed at source — dividends, rental profit, significant savings interest or self-employed profits — you may need to report it through a Self Assessment tax return. That's also where you'd claim the effect of pension contributions or Gift Aid if it isn't already in your code.
Keeping records helps. Note your pension contributions and Gift Aid donations through the year, because they're what reduce adjusted net income, and they're easy to overlook when it's time to do your tax return. If your circumstances are complex — multiple income sources, company dividends, or the pension annual allowance limits are reached — it's worth checking the position carefully with an accountant to make sure you are paying the right tax.