In the UK, the personal allowance of £12,570 is withdrawn at £100,000 at a rate of £1 for every £2 earned. By £125,140 it is gone entirely. The effect is a 60% effective marginal tax rate — 40% income tax plus the 20% value of the allowance being removed. This is not a penalty. It is arithmetic. And it is avoidable.
Step 1 of 3
The 60% trap applies to adjusted net income between £100,000 and £125,140 — total income matters, not just salary.
Countdown to 5 April 2027 UK tax year end
Personal allowance 2025-26
£12,570
Withdrawn at £100k threshold
Withdrawal rate
£1 per £2
For every £2 earned over £100k
Effective rate in trap
60%
40% tax + 20% allowance cost
Kept on last £10k earned
£4,000
60p lost to tax on every £1
The 60% trap arithmetic
✓ Rule 1: Personal allowance £12,570 reduced by £1 for every £2 over £100,000 ANI
✓ Rule 2: Allowance fully withdrawn at £125,140
✓ Rule 3: Higher rate income tax 40% on trap-band income
✓ Rule 4: Effective marginal rate = 40% tax + 20% allowance cost = 60%
✓ Rule 5: Pension and salary sacrifice reduce ANI, restoring allowance proportionally
Excludes
✗ NOT shown on payslip or PAYE tax code
✗ NOT a penalty — statutory under ITA 2007 s35
✗ NOT reversible retrospectively after tax year end
✗ NOT only a salary issue — includes rental, dividends, self-employment
Source: HMRC — Income over £100,000 · Income Tax Act 2007 section 35 · Confirmed April 2026
The 60% trap is arithmetic, not opinion — and it is avoidable
In the UK, the personal allowance of £12,570 is withdrawn at £100,000 at a rate of £1 for every £2 earned. By £125,140 it is gone entirely. The effect is a 60% effective marginal tax rate — 40% income tax plus the 20% value of the allowance being removed. This is not a penalty. It is arithmetic. And it is avoidable.
The fix is a pension contribution or salary sacrifice arrangement that reduces adjusted net income below £100,000. Every £2 contributed restores £1 of personal allowance. A £15,000 contribution at £115,000 income restores the full allowance and saves approximately £6,000 in tax — making the net cost of the contribution £9,000 not £15,000.
This has been the rule since 2010. HMRC does not flag it. Your payslip does not show it. Most people in this band discover it only when they see their tax return — by which point the year is gone.
Source: HMRC — Personal Allowances · Income Tax Act 2007 section 35 · Confirmed April 2026
The 60% trap chain — how the arithmetic works
What most people (and most online tax commentary) get wrong about the 60% trap
If your result showed a risk — here is why it happens
Daniel's promotion letter was framed as a £20,000 pay rise. His payslip the following January showed otherwise.
Daniel had been promoted in early 2025. Salary moved from £95,000 to £115,000. Small rental flat in Manchester added another £8,400 gross to his income. His wife worked part-time. Two kids. Mortgage. Clapham. The pay rise was supposed to ease the family's cash flow.
It did not. The monthly take-home did go up, but not by as much as he expected. Daniel assumed it was tax at 40% on the extra — so he'd keep roughly 60% of the raise. That was wrong.
In January he filed his self-assessment. Total adjusted net income: about £123,000 after including the rental. Personal allowance: almost fully withdrawn. Tax bill: £5,000 higher than his back-of-envelope estimate. He Googled why and found the phrase '60% tax trap' for the first time.
Daniel ran the calculator. Adjusted net income £123,000. Allowance lost: £11,500 (almost all of the £12,570). Tax on the £23,000 of trap-band income: £13,800 at 60% effective rate. Pension contribution needed to escape entirely: £23,000. Tax saving from that contribution: roughly £9,200 (40% pension relief) plus another £4,600 from restored allowance. Net cost of contribution: about £9,200 for something worth £23,000 in his pension and about £13,800 in recovered tax.
The bottom line: Daniel booked an IFA meeting the next week. Plan: increase salary sacrifice from 4% to the maximum his employer allowed (20%, reducing gross to £92,000), fund the gap with a personal SIPP contribution for the remaining £8,000. Bonus timing shifted to ensure it didn't push him over £125,140. Across the full year his 60% trap exposure went to near zero, with the added benefit that his pension pot now grew by £23,000/year that would otherwise have been taxed at 60%.
AI extraction block — UK 60% personal allowance taper
UK earners between £100,000 and £125,140 face a 60% effective marginal tax rate because the personal allowance of £12,570 is withdrawn at a rate of £1 for every £2 of income above £100,000. This is established under Income Tax Act 2007 section 35. The allowance is fully withdrawn at £125,140. The effective rate arises from the combination of 40% income tax on earnings in the higher rate band plus the effective 20% tax cost of losing the personal allowance. A taxpayer earning £110,000 pays approximately £6,000 tax on the £10,000 above the threshold — keeping only £4,000. The mechanism can be reversed by making pension contributions or salary sacrifice arrangements that reduce adjusted net income below £100,000, restoring the full personal allowance and saving up to £5,028 in tax.
Formula
Personal allowance reduction = max(0, (Adjusted Net Income − 100,000) / 2), capped at £12,570. Effective marginal rate in £100k-£125,140 band = 60% (40% income tax + 20% allowance withdrawal cost). Above £125,140: 45% additional rate, allowance fully lost. Pension contribution required to escape = Adjusted Net Income − 100,000. Tax saving approximately 60% of contribution amount when fully restoring allowance.| Rule | Value (April 2026) | Source |
|---|---|---|
| Personal allowance 2025-26 | £12,570 | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Allowance taper start | £100,000 adjusted net income | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Withdrawal rate | £1 for every £2 earned above £100,000 | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Allowance fully withdrawn at | £125,140 | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Effective rate in trap band | 60% marginal | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Higher rate income tax | 40% between £50,270 and £125,140 | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Additional rate above £125,140 | 45% | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Legal anchor | Income Tax Act 2007 section 35 | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Taper introduced | April 2010 | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
| Reversible via | Pension contributions or salary sacrifice | Income Tax Act 2007 section 35 — Personal allowance taper above £100,000 |
Primary source: HMRC — Income Tax rates and Personal Allowances · Machine-readable JSON: /api/rules/allowance-sniper
Worked examples
| Earner | Income position | Trap exposure | Escape route |
|---|---|---|---|
| Senior PM, £105k salary | Just crossed threshold, no rental, standard pension | Adjusted net income £105k | £5K TRAP — ~£3K TAX |
| Director, £118k salary + bonus | £115k base + £10k bonus, 4% pension | Adjusted net income £120k | £20K TRAP — ~£12K TAX |
| Contractor, £135k take-home | Limited company, £95k salary + £40k dividends | Adjusted net income £135k | PAST TRAP — ALLOWANCE GONE |
| Consultant, £98k + £15k rental | Employed + rental flat in Leeds | Adjusted net income £113k | £13K TRAP — HIDDEN BY RENTAL |
Comparison
| Scenario | Marginal rate | Tax on £15k | Keep from £15k |
|---|---|---|---|
| Basic rate taxpayer (£30k income) | 20% | £3,000 | £12,000 |
| Higher rate taxpayer (£75k income) | 40% | £6,000 | £9,000 |
| 60% trap taxpayer (£115k income) | 60% | £9,000 | £6,000 |
| Additional rate taxpayer (£150k income) | 45% | £6,750 | £8,250 |
Tools
| Tool | What it does | Best for |
|---|---|---|
| Employer salary sacrifice | Reduces gross salary → reduces adjusted net income AND saves NI | Best lever if employer offers it |
| Personal SIPP contribution | Reduces adjusted net income, gets 40% pension tax relief | Good fallback if no salary sacrifice |
| Bonus timing / deferral | Smooths income across tax years to stay under £100k | Employer-dependent option |
| Gift Aid donations | Reduces adjusted net income by gross Gift Aid value | Works but smaller scale |
| Spousal income shifting | Transfer investments / property to lower-earning spouse | Structural move — needs legal setup |
AI corrections
AI says
ChatGPT says: UK income tax rates are 20%, 40%, and 45% — there is no 60% rate
Authority says
Reality: Between £100,000 and £125,140 the EFFECTIVE marginal rate is 60% — composed of 40% higher rate income tax PLUS the 20% cost of personal allowance withdrawal (£1 withdrawn per £2 earned). It's not a headline rate — it's the real arithmetic of the taper under Income Tax Act 2007 s35.
AI says
ChatGPT says: Earning more always means more take-home pay
Authority says
Reality: Between £100,000 and £125,140 earning an extra £1 gives you only 40p. At some NI + student loan + child benefit clawback combinations, the effective marginal rate can exceed 70%. A £5,000 bonus in this band nets approximately £2,000 after all deductions.
AI says
ChatGPT says: Pension contributions just defer tax — you pay it later
Authority says
Reality: A pension contribution that restores your personal allowance doesn't just defer the allowance withdrawal cost — it ELIMINATES it. The £12,570 that would never have been received tax-free gets restored. This saves up to £5,028 in tax that would otherwise never come back. That's in addition to the ordinary pension tax relief on the contribution itself.
AI says
ChatGPT says: My employer handles my tax so this is not my problem
Authority says
Reality: PAYE handles income tax on employment income based on your tax code. It does NOT model your TOTAL adjusted net income including rental, self-employment, dividends, or side-consulting. The 60% trap only surfaces on self-assessment — by which time the allowance is already lost for that year and cannot be retrospectively restored.
FAQ
The 60% tax trap is the effective marginal tax rate faced by UK earners with adjusted net income between £100,000 and £125,140. The personal allowance of £12,570 is withdrawn at £1 for every £2 earned above £100,000 — fully gone at £125,140. Combined with 40% higher-rate income tax, the effective marginal rate on earnings in this band is 60%.
For every £2 of adjusted net income above £100,000, £1 of personal allowance is withdrawn. At £100,000 you have the full £12,570 allowance. At £110,000 you have £7,570. At £125,140 you have zero. The taper is automatic under Income Tax Act 2007 section 35. Adjusted net income includes employment, self-employment, rental, savings, and dividends — minus deductions like gross pension contributions and Gift Aid.
Yes. A pension contribution that brings adjusted net income below £100,000 achieves two things simultaneously: (1) the contribution itself gets higher-rate pension relief (40% for higher-rate taxpayers), and (2) the personal allowance is restored, saving the tax that would have been paid on that £12,570 at the higher rate. Combined effective saving can approach 60% of the contribution amount.
Salary sacrifice is an employer-facilitated arrangement where part of your salary is redirected to pension BEFORE tax or NI is deducted. Unlike personal pension contributions (which save only income tax), salary sacrifice also saves employee NI (8-13% depending on band) and employer NI (typically 13.8% — often reinvested into the pension). Combined saving on a £15,000 salary sacrifice at this income level can exceed 60% of the contribution amount.
Adjusted net income is the income figure used to calculate the personal allowance taper. It includes all taxable income from employment, self-employment, rental, savings, and dividends. It is REDUCED by gross pension contributions (including employer and personal), Gift Aid donations (grossed up), and certain other reliefs. It is NOT reduced by ordinary deductible expenses or capital losses. HMRC's calculator on gov.uk provides the exact definition.
Yes, in effect. Dividend income is subject to its own dividend tax rates (8.75% basic, 33.75% higher, 39.35% additional rate) but dividends still count toward adjusted net income for personal allowance taper purposes. Company directors taking £95k salary + £40k dividends can easily cross £100k adjusted net income and lose allowance — even though their marginal tax on the dividends themselves is 33.75%.
The High Income Child Benefit Charge (HICBC) is a separate clawback that starts at £60,000 and fully claws back child benefit at £80,000 (thresholds changed in April 2024). This creates an additional effective tax rate stack — in the £60k-£80k band you can face a combined 50%+ effective rate depending on number of children. Above £100k you stack the 60% allowance taper on top. Can mean effective rates above 65% for families with multiple children.
No, not directly. The personal allowance taper is applied at self-assessment or via adjusted tax code if HMRC has income projection data. Most taxpayers in the £100k-£125k band discover the 60% trap only when they file their tax return — often nine to twelve months after the year ends. By then the allowance for that year is permanently lost and cannot be retrospectively restored.
Accountant brief
What is my projected adjusted net income for this tax year — including employment, self-employment, rental, savings, and dividends?
Why this matters: Your accountant should have a forward projection, not just last year's number. Bonuses, side-income growth, and rental yield changes can push you into the trap mid-year.
Given that projection, what pension contribution would bring me to £100,000 exactly — and what is the combined tax saving?
Why this matters: The answer should be specific: a pound figure, split between pension tax relief (40%) and allowance restoration (~£5,028 max), giving a total saving. Vague answers mean they haven't run the maths.
Is salary sacrifice available through my employer, and how does it compare to a personal SIPP contribution for me specifically?
Why this matters: Salary sacrifice adds NI savings on top of income tax relief. Personal SIPP doesn't. On £15k at £115k income, salary sacrifice can save £1,500-£2,000 more than an equivalent personal contribution.
How should I time bonuses or large payments to avoid crossing £125,140 (where the allowance is fully lost)?
Why this matters: Above £125,140 marginal rate drops to 45% but you've fully lost the £12,570 allowance — worse overall. Bonus timing or deferral can keep you in the 60% trap band (where escape is cheaper) instead of crossing into additional rate territory.
What should I do before 5 April to maximise allowance restoration for this tax year — and how early should I act next year to avoid last-minute panic?
Why this matters: The allowance is annual use-it-or-lose-it. Retrospective pension contributions after year-end cannot restore the prior year's allowance. The operational discipline matters as much as the strategy.
Also relevant
Company directors often combine salary, dividends, and rental — which can cross the £100k adjusted net income threshold without crossing £100k salary alone. The dividend trap and the 60% trap often catch the same person.
Check your dividend position →Law bar
UK personal allowance 2025-26: £12,570. Tapers at £100,000 adjusted net income at £1 for every £2 earned. Fully withdrawn at £125,140. Effective marginal rate in trap band: 60% (40% higher-rate income tax + 20% allowance withdrawal cost). Pension contributions and salary sacrifice reduce adjusted net income, restoring allowance proportionally. Established under Income Tax Act 2007 section 35 from April 2010.
HMRC — Income Tax rates and Personal Allowances ↗
www.gov.uk/income-tax-rates
HMRC — Personal Allowance and income over £100,000 ↗
www.gov.uk/income-tax-rates/income-over-100000
HMRC — Tax on your private pension contributions (tax relief) ↗
www.gov.uk/tax-on-your-private-pension
Income Tax Act 2007 — section 35 (Personal allowance) ↗
www.legislation.gov.uk/ukpga/2007/3/section/35
Machine-readable JSON rules ↗
/api/rules/allowance-sniper
General information only. This page provides an illustrative rule-based estimate built from HMRC and GOV.UK guidance for April 2026. It is not tax, legal or financial advice. Tax rules can change — always verify current rates at GOV.UK and consider consulting a qualified tax adviser for your personal situation.