What is the 60% tax trap?

In the 2024/25 tax year, 698,000 people paid 60% tax on part of their taxable income. This is an increase of 12% compared to the previous year (624,000 in 2023/24). As inflation rises, tax thresholds and salaries increase, more people are pushed in to higher tax rates as tax thresholds have been frozen by successive governments. This is referred to as ‘fiscal drag’. In the Autumn 2025 Budget the Government announced that income tax thresholds will continue to be frozen until 2031.

Income tax rates in England, Wales and Northern Ireland are spread over three bands as of 2025/26 and 2026/27. Those in the basic rate band  pay tax at 20% while those in the higher and additional rate bands pay 40% and 45% respectively. In Scotland, the rates range from 19% to 48%. 

What is the 60% tax trap? 

Most individuals in the UK are eligible for the personal allowance of £12,570. However, once an individual's income exceeds £100,000, their personal allowance is withdrawn by £1 for every £2 by which adjusted income exceeds £100,000. Once adjusted income reaches £125,140 there is no personal allowance left. 

This means for the income earned between £100,000 and £125,140, the taxpayer is taxed at a hefty effective rate of 60%. 

When do you fall into the tax trap?

You fall into the 60% tax trap if you are earning between £100,00 and £125,140 and having  your personal allowance restricted. For every £100 of income between these amounts, you’ll only get £40 of income in the bank as £40 is paid in income tax and £20 is lost by the reduction of the personal allowance.  

Who is affected by the 60% tax trap? 

You may be affected by the 60% tax trap if: 

•  your income is within the £100,000 to £125,140 range 
•  you have the standard personal allowance of £12,570, and 
• your main income is from employment. 

If your income is higher than £125,140 then your effective tax rate (i.e. the tax rate you pay on each additional £1 of income) will be lower as there is no more personal allowance to lose. 

Can you give an example of the 60% tax trap? 

You previously earned £100,000. You receive a pay rise and now earn £101,000: 

• You pay £400 (40%) on the extra £1,000. 
• You lose £500 of your personal allowance, which is the equivalent of paying an additional £200 of tax 
• £400 + £200 = £600 on tax of £1,000 of earnings. Effective rate = 60% 

What about the High Income Child Benefit Charge? 

The High Income Child Benefit Tax Charge (HICBC)  can also create an additional tax trap for higher earners. The HICBC applies when you or your partner claim Child Benefit and you or your partner have adjusted net income of more than £60,000 (from 2024/2025 onwards). If you both earn more than £60,000, the higher income partner must pay the HICBC. 

For earnings between £60,000 and £80,000 the charge is 1% per £200 of earnings, until at £80,000 the HICBC cancels out the Child Benefit.  

For instance, a person with two children earning £70,000 would have an effective rate of tax of 53.26%. 

How can you avoid the 60% tax trap? 

Managing your income through tax planning may help you to avoid this trap. For example, taking measures to reduce your adjusted net income below £100,000 will mean you keep your personal allowance.  It can also help you to qualify for Tax Free Childcare, which is only available where neither parent has adjusted net income of £100,000 or more. Tax Free Childcare can save working parents up to £4,000 per child per year.

Paying into a pension and making donations to charities with Gift Aid may also help to do this and can reduce your tax liability. 

How do you get out of the 60% tax trap? 

Once your income exceeds £125,140, you are no longer in the 60% tax trap and your effective tax rate will be the additional rate of income tax of 45%. 

Worried about the 60% tax trap? 

It’s always worth speaking to an accountant when it comes to tax planning.  

For more information on income tax planning for individuals read our guide here.   

If you would like any further guidance in this area, please contact us on 01480 592002 or use our simple online contact form to arrange a free initial consultation. 

Last updated 28 Jan 2026 | First published 13 Feb 2024

Share

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

---