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What is the 60% Tax Trap? How the Personal Allowance Taper Works

tax5 min read2026-06-06

The "60% tax trap" is one of the most misunderstood aspects of the UK tax system. If you earn between £100,000 and £125,140, your effective marginal tax rate can reach 60% — significantly higher than the advertised 40% higher rate. Here's how it works.

What is the Personal Allowance Taper?

The Personal Allowance is normally £12,570. However, once your income exceeds £100,000, your Personal Allowance reduces by £1 for every £2 you earn over £100,000. This means:

  • At £100,000: Full Personal Allowance of £12,570
  • At £110,000: Personal Allowance reduced to £7,570
  • At £120,000: Personal Allowance reduced to £2,570
  • At £125,140: Personal Allowance eliminated entirely

Why Does This Create a 60% Rate?

When you earn an extra £2 over £100,000:

  1. That £2 is taxed at 40% (higher rate) = 80p tax
  2. You also lose £1 of your Personal Allowance
  3. That £1 now also gets taxed at 40% = 40p additional tax

So on £2 of additional income, you pay £1.20 in tax — that's an effective 60% rate.

How to Mitigate the 60% Tax Trap

There are several strategies to reduce the impact of the 60% tax trap:

  • Pension contributions: Salary sacrifice pension contributions reduce your taxable income and can keep you below the taper threshold
  • Salary sacrifice schemes: Company cars, cycle-to-work schemes, and other salary sacrifice arrangements reduce your taxable income
  • Charitable donations: Gift Aid donations can reduce your adjusted net income
  • ISA investments: While they don't reduce your tax bill directly, ISAs help shelter investment returns from tax

The Impact on Your Take-Home Pay

The 60% trap means that earning more between £100k and £125k is far less beneficial than you might expect. Use our salary calculator for £110,000 to see exactly how the taper affects your take-home pay.

Scotland and the Tax Trap

The Personal Allowance taper applies the same way in Scotland, but Scotland's higher band rates mean the effective marginal rate in the taper zone is even higher — approximately 63% instead of 60%.

Check our comparison tool to see how this affects Scottish taxpayers differently.