The 60% tax trap for earning over £100,000: What it is and how to avoid it

Written: 24 September 2026. Updated: 8 October 2026

• Your Personal Allowance may taper once your income exceeds £100,000.
• Earnings between £100,000 and £125,140 may be subject to an effective tax rate of 60%.
• Fiscal drag is causing more people to get caught in the 60% tax trap as earnings rise.
• Rejecting a pay rise will not increase your take-home pay as only a portion of your income is taxed at 60%.
• Contributing to your pension could reduce your adjusted net income, helping you simultaneously avoid the 60% tax trap and boost your retirement savings.

Many people are aware that their Income Tax rate increases as they move up the tax bands. But what is perhaps less well-known is that your tax bill can also increase once your earnings hit six figures.

Indeed, your earnings between £100,000 and £125,140 can face an effective Income Tax rate of 60% – known as “the 60% tax trap”.

In this article, we explain what the 60% tax trap is, why more taxpayers are getting caught in it, and the steps you can take to avoid it.

What is the 60% tax trap?

Once your annual income exceeds £100,000, you start losing your Personal Allowance.

The Personal Allowance is the amount you can earn in the tax year before paying Income Tax. In 2026/27, it stands at £12,570.

For every £2 you earn over £100,000, your Personal Allowance reduces by £1. The allowance tapers until your income reaches £125,140, at which point you move into the additional-rate tax band and lose your Personal Allowance in full.

In effect, this can mean earnings between £100,000 and £125,140 are taxed at a rate of 60%.

An example of the 60% tax trap in action

Keith earns £110,000 in 2026/27, making him a higher-rate taxpayer.

Because £10,000 of his income falls into the 60% tax trap, he loses £5,000 of his Personal Allowance.

The £5,000 is added to his taxable income at his marginal rate (40%), meaning he pays £2,000 in tax on the lost allowance.

The original £10,000 is also taxed at 40%, costing him £4,000.

In total, Keith pays £6,000 in Income Tax on £10,000 of earnings – an effective tax rate of 60%.

Why are more people falling into the 60% tax trap?

As earnings rise over time, more people are getting caught in the 60% tax trap.

In 2021, the government froze the Income Tax thresholds, including both the Personal Allowance and the £100,000 threshold at which it begins to taper. The freeze is currently expected to remain in place until at least 2031.

With the freeze set to last 10 years, and annual wage growth averaging 3.9% a year between May and July 2026 according to the Office for National Statistics, you may not need a promotion or significant pay rise to get caught in the 60% tax trap. Even small annual salary increases could eventually nudge you over the £100,000 threshold.

According to IG, had the threshold risen with inflation, it would be £160,000 in 2026 and £174,000 by 2031. By 2031, IG forecasts that 2.5 million taxpayers will be subject to an effective tax rate of 60% on a portion of their earnings – up from 2.06 million in 2026/27.

Remember: It’s not just your salary that counts towards your Income Tax threshold. Other earnings such as savings interest, investment returns, rental income, or certain benefits can also tip you over into the 60% tax trap.

Read more about minimising tax strategies for high-net-worth individuals

Should I reject a pay rise to avoid getting caught in the 60% tax trap?

Since only the portion of your earnings that sits between £100,000 and £125,140 is subject to an effective tax rate of 60%, accepting a pay rise generally won’t reduce your take-home pay.

What’s more, in some cases, you may be able to avoid losing your Personal Allowance while earning over £100,000.

Your pension contributions are typically deducted from your adjusted net income. So, by paying more into your pension, you may be able to steer clear of the 60% tax trap without reducing your earnings.

Not only could you retain your full Personal Allowance, thereby avoiding the effective 60% tax rate, but you could also boost your pension pot through tax relief.

Generally, you can claim tax relief on your pension contributions at your marginal rate of Income Tax. Tax relief is normally applied automatically at 20%. As a higher- or additional-rate taxpayer, you may be able to claim a further 20% or 25%, respectively, provided your contributions don’t exceed the Annual Allowance. In 2026/27, the Annual Allowance is £60,000 or 100% of your earnings, whichever is lower.

So, by paying into your pension, you could simultaneously retain your full Personal Allowance and boost your retirement savings.

That said, this approach may not be suitable in all circumstances. It’s worth consulting a financial planner before implementing any tax mitigation or retirement planning strategies.

Find out more about how we can support you with retirement planning

Speak to our team for support

If you’re worried about your earnings getting caught in the 60% tax trap, get in touch with our team for support in devising a strategy to maximise your tax efficiency.

Email us at email@fiduciawealth.co.uk or call us on 01206 321 045 to find out how we could support you.

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Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.