The 60% tax trap explained

Tax year 2026-27 · Figures checked against GOV.UK on 6 November 2026

What is the 60% tax trap?

Most people get a tax-free Personal Allowance of £12,570. GOV.UK says it "goes down by £1 for every £2 that your adjusted net income is above £100,000", and is zero if your income is £125,140 or above.

So each extra £1 you earn in that range is taxed at the 40% higher rate, and it also pushes 50p of your allowance into taxable income, which costs another 20p. That is an effective 60% on that slice, before National Insurance and any student loan repayments. The range is sometimes called the 60% tax trap.

These figures are for England, Wales and Northern Ireland. Scotland has different rates and bands, so the effective rate in that income range is different there.

A worked example

Imagine a salary of £110,000 in 2026-27, with no other income, ignoring National Insurance and student loans.

• Your income is £10,000 above £100,000, so your Personal Allowance falls by £5,000, from £12,570 to £7,570.
• Your taxable income is £102,430. The first £37,700 is taxed at 20% (£7,540) and the remaining £64,730 at 40% (£25,892). Income tax would be £33,432.
• At £100,000 the same calculation gives £27,432. The extra £10,000 of income costs £6,000 more in income tax: 60%.

What can lower the income that counts?

The reduction in your Personal Allowance depends on your adjusted net income, which is your total taxable income before the Personal Allowance, less certain reliefs. GOV.UK says you can take off the grossed-up amount of Gift Aid donations and of pension contributions where your provider has already given you tax relief at the basic rate.

Here is the same £110,000 example with a £10,000 pension contribution made through a scheme where the provider adds basic-rate relief. You pay £8,000 and the provider claims £2,000 from the government. Your adjusted net income falls to £100,000, so you keep your full Personal Allowance. Your basic rate band is also extended by the gross contribution, and you could claim the extra relief through Self Assessment.

• Taxable income is £97,430. The first £47,700 is taxed at 20% (£9,540) and the remaining £49,730 at 40% (£19,892).
• Income tax would be £29,432, which is £4,000 lower than £33,432.
• Counting the £2,000 the provider adds, £10,000 reaches your pension for a net cost to you of £4,000 once the extra relief is claimed.

How tax relief on pension contributions reaches you depends on how your scheme works (relief at source, net pay or salary sacrifice), so check with your pension provider or employer. There are also limits on how much you can pay in each year, including the annual allowance.

Gift Aid donations also lower adjusted net income. The adjusted net income figure is also used for the High Income Child Benefit Charge, which starts above £60,000.

Check your own figures

The SavingTax app has a free pension relief calculator and guides on adjusted net income, the pension annual allowance and Gift Aid. Premium has a "Beat the 60% Tax Trap" scenario that shows how much you could pay in to bring your income under £100,000, using the details you enter.

Sources

• GOV.UK: Income Tax rates, income over £100,000
• GOV.UK: Income Tax rates and Personal Allowances
• GOV.UK: Adjusted net income
• GOV.UK: Tax relief on pension contributions

This page is general information, not financial, tax or legal advice. The examples are simplified and use 2026-27 rates for England, Wales and Northern Ireland. Your own position depends on your circumstances. For advice, speak to a qualified professional.