The 60% tax trap explained (2026/27): how to escape the £10…

If your income sits between £100,000 and £125,140, the next £1 you earn is taxed at roughly 60p in the pound. Not 40%. Not 45%. About 60%. It is the single most punishing slice of the UK income tax system, it is almost entirely invisible on your payslip, and most people who fall into it never realise it is happening — or that they can legally climb back out.

This is the so-called "60% tax trap", and in 2026/27 more people are walking into it than ever, because the thresholds that define it have been frozen for years. Here is exactly how it works, who it hits hardest, and the two clean, HMRC-sanctioned ways to escape it.

What the 60% tax trap actually is

In 2026/27 everyone starts with a tax-free Personal Allowance of £12,570. But once your adjusted net income goes over £100,000, HMRC withdraws that allowance — by £1 for every £2 you earn above £100,000.

Work the arithmetic through and the allowance is gone completely once you reach £125,140 (because £25,140 ÷ 2 = £12,570, the full allowance). Across that £100,000–£125,140 band, two things happen to every extra pound you earn at the same time:

You pay 40% higher-rate tax on the pound itself; and
For every £2 you earn, £1 of previously tax-free allowance becomes taxable at 40% too — adding another 20p of tax per pound earned.

Add the 40% to the extra 20% and you get an effective marginal rate of roughly 60% on income inside that band. It is not a separate "60% tax bracket" — there is no such thing on the official rate table — but the combined effect is real money leaving your pocket. The table below shows how the band compares with those either side of it:

Income band (2026/27)	Headline rate	Effective marginal rate	Why
£50,271 – £100,000	40%	40%	Standard higher rate; Personal Allowance intact
£100,000 – £125,140	40%	~60%	40% tax plus Personal Allowance withdrawn at £1 per £2
Over £125,140	45%	45%	Additional rate; allowance already fully withdrawn

The 2026/27 income tax bands for context

Personal Allowance: £12,570 (tax-free)
Basic rate 20%: £12,571–£50,270
Higher rate 40%: £50,271–£125,140
Additional rate 45%: over £125,140

The Personal Allowance and the £50,270 higher-rate threshold are now frozen until 5 April 2031 — the freeze was extended again in the November 2025 Budget, having previously been due to end in April 2028. The additional-rate threshold of £125,140 is frozen too. For a fuller walk-through of the allowances and where the lines fall, see our guide to how much you can earn before paying tax.

What "adjusted net income" means — and why it matters

Person filling out legal paperwork at a desk

The trap is triggered by adjusted net income, not your gross salary. That distinction is the whole key to escaping it.

Adjusted net income is your total taxable income — salary, bonus, dividends, rental profit, savings interest — less certain deductions, the two most useful of which are:

Personal (gross) pension contributions; and
Gift Aid donations (grossed up).

Because these come off the figure HMRC tests against £100,000, you can deliberately push your adjusted net income back under the threshold and reclaim the Personal Allowance you were losing. That is what turns the 60% trap into a 60% opportunity.

Who gets caught

The trap is no longer just a problem for the seriously wealthy. Thanks to years of frozen thresholds and rising pay, it now routinely catches:

Company directors who pay themselves a mix of salary and dividends and tip over £100,000 of combined income.
Salaried high earners who receive a pay rise or promotion that nudges them past £100,000.
Bonus recipients — a £15,000 bonus landing on a £95,000 salary can be taxed at an effective 60%, so well over half of it disappears.
Landlords and those with side income whose total adjusted net income crosses the line once rental profit is added on top of employment income.

Directors deciding how to take money out of their company should think about this band before declaring a bonus or a large dividend. Our pieces on how to pay yourself from a limited company and on the broader responsibilities of a UK director are worth reading alongside this one.

Why the trap keeps catching more people: fiscal drag

When tax thresholds are frozen while wages and prices rise, more of your income is dragged into higher bands and more people are pulled into tax altogether — without the government ever announcing a rate rise. This is "fiscal drag", and it is doing the heavy lifting here.

The freeze of the Personal Allowance (£12,570), the higher-rate threshold (£50,270) and the additional-rate threshold (£125,140) now runs to 5 April 2031. Official estimates suggest the freeze brings around 700,000 more people into income tax by 2030/31 than if thresholds had been uprated with inflation. The £100,000 taper point has never moved, so every pay rise pushes more earners into the 60% band.

Worked example: dropping from £110,000 to £100,000 with a pension contribution

Meet Priya, a marketing director with an adjusted net income of £110,000 in 2026/27. She is £10,000 into the taper, so she has already lost £5,000 of her Personal Allowance (£1 for every £2 over £100,000).

Priya decides to make a personal pension contribution to bring her adjusted net income down to exactly £100,000. To reduce it by £10,000, she pays £8,000 into her pension from her own bank account. Her pension provider adds 20% basic-rate relief at source, turning it into a £10,000 gross contribution. That £10,000 gross figure is what comes off her adjusted net income.

Now look at what that £10,000 of income would otherwise have cost her, and what she gets back:

Basic-rate relief (20%): already added by the provider — £2,000 — so a £10,000 pension pot costs her only £8,000 up front.
Higher-rate relief (a further 20%): she claims this through her Self Assessment return — worth another £2,000.
Reclaimed Personal Allowance: by dropping back to £100,000, she recovers the £5,000 of allowance she was losing. That £5,000 would have been taxed at 40%, so reinstating it saves a further £2,000.

Tally it up: Priya has £10,000 sitting in her pension, but the true net cost to her is £8,000 minus the £2,000 higher-rate relief minus the £2,000 of recovered allowance — about £4,000. In other words, she has secured £10,000 of retirement savings for roughly £4,000 of real money. That is effective tax relief of around 60% — the mirror image of the 60% she was being charged.

The relief works because the higher-rate top-up and the reclaimed allowance are both administered through your tax return. If you have never filed one, start with our guides to whether you need to do a Self Assessment and how your Self Assessment bill is calculated.

Escape route one: personal pension contributions

This is the cleanest tool for most people. A gross personal pension contribution reduces your adjusted net income pound for pound, so a contribution that brings you from above £100,000 back to £100,000 reclaims allowance at the punishing 60% effective rate.

A few practical points:

You can normally get tax relief on contributions up to 100% of your relevant UK earnings, capped by the annual allowance (and any carry-forward of unused allowance from earlier years). High earners can face a tapered annual allowance, so check before making a large one-off payment.
Relief at source means you pay 80% and the provider claims the 20% — you claim the rest through Self Assessment.
Salary-sacrifice workplace pensions reduce your taxable pay directly, which also lowers adjusted net income; the mechanics differ but the effect on the trap is similar.

Escape route two: Gift Aid donations

Charitable donations made under Gift Aid also reduce your adjusted net income, on a grossed-up basis. Donate £8,000 and the charity reclaims basic-rate tax to make it £10,000 gross — and that £10,000 comes off your adjusted net income exactly like a pension contribution.

If your only goal is to reclaim allowance, a pension keeps the money working for you, whereas Gift Aid gives it away. But if you were going to give to charity anyway, timing a donation to land before 6 April and pull you under £100,000 is a genuinely tax-efficient way to do it. You can carry a Gift Aid donation back to the previous tax year in some cases — useful if you only realise after the year-end that you crossed the line.

What does not help — and a word on Scotland

Spending money does not reduce adjusted net income; only specific reliefs like pensions and Gift Aid do. ISA contributions, mortgage overpayments and ordinary saving will not move the needle on the taper, however sensible they are otherwise.

Scotland sets its own income tax bands and rates, so a Scottish taxpayer's marginal rates inside this region differ from the rest of the UK. But the Personal Allowance taper is UK-wide — it is set by the UK government and applies in Scotland too — so the £100,000 trigger and the £125,140 wipe-out point are the same wherever you live in the UK.

How to plan around it through the year

The trap is far easier to manage if you act before 5 April rather than after. A simple routine:

Estimate your adjusted net income early — include bonus, dividends and any rental or savings income, not just salary.
If you are heading over £100,000, work out how much gross pension or Gift Aid you would need to drop back under the line.
Make the contribution before the tax year ends, and keep records so you can claim higher-rate relief on your return.
If a bonus is coming, ask whether it can be paid partly into your pension before it hits your payslip.

If dividends form part of how you cross the threshold, our explainer on dividend tax rates and allowances will help you model the full picture before you declare.

The bottom line

The 60% tax trap is not a loophole or a glitch — it is the deliberate withdrawal of your Personal Allowance between £100,000 and £125,140, and frozen thresholds mean it now catches ordinary high earners, not just the rich. The good news is that the same arithmetic that punishes you can reward you: a pension contribution or Gift Aid donation that drops your adjusted net income back to £100,000 buys relief at the same eye-watering 60% rate. If you are anywhere near the line, plan it before the tax year ends — and take advice on your annual allowance before making a big contribution.

Sources

Frequently asked questions

Is the 60% tax trap a real tax band?

No. There is no official 60% rate. The headline rates in 2026/27 are 20%, 40% and 45%. The 60% figure is the effective marginal rate between £100,000 and £125,140, created by paying 40% income tax while your tax-free Personal Allowance is withdrawn at £1 for every £2 of income. Combined, that costs roughly 60p of every extra pound earned in that band.

How much do I need to pay into a pension to escape the trap?

Enough gross contribution to bring your adjusted net income back to £100,000. If your adjusted net income is £110,000, a £10,000 gross contribution (you pay £8,000, the provider adds £2,000) does it. That recovers your lost Personal Allowance and, with higher-rate relief claimed on your tax return, gives effective relief of around 60%.

Does spending or saving money reduce my adjusted net income?

No. Only specific reliefs reduce adjusted net income — principally gross personal pension contributions and grossed-up Gift Aid donations. ISA contributions, mortgage overpayments and ordinary savings do not lower it, so they will not help you reclaim the Personal Allowance.

Does the 60% trap apply in Scotland?

The Personal Allowance taper is UK-wide, so the £100,000 trigger and the £125,140 wipe-out point apply in Scotland exactly as in the rest of the UK. However, Scotland sets its own income tax bands and rates, so the precise effective marginal rate inside that band differs for Scottish taxpayers.