The 60% Tax Trap
Nowhere on your payslip will you see a tax rate of 60%. It doesn't exist as an official band. But if you earn between £100,000 and £125,140, you are, quietly, paying an effective marginal rate of 60% on that slice of income. This page explains why, because most people don't see it coming, usually the first time a bonus or pay rise pushes them over £100,000. See £100,000 After Tax for the full breakdown at the exact salary this trap begins.
Where it comes from
As explained on the Income Tax page, everyone gets a tax-free Personal Allowance, £12,570 for 2026/27. But once your adjusted net income goes above £100,000, that allowance starts shrinking: for every £2 you earn above £100,000, you lose £1 of your Personal Allowance. By the time you reach £125,140, the allowance has been reduced to zero entirely.
So between £100,000 and £125,140, two things are happening to you at once:
- You're paying the normal 40% higher rate on that income, same as anyone else in the higher-rate band.
- You're simultaneously losing tax-free allowance you'd otherwise have kept, which means more of your income becomes taxable, on top of the 40% you're already paying on it.
Combine those two effects and the effective marginal rate on income in this band comes out at 60%.
Worked example: the 60% trap in action
Say you earn a base salary of £110,000, and you're offered a £5,000 bonus, taking your income to £115,000. Both figures sit within the £100,000–£125,140 band, so the taper applies to the whole bonus.
Step 1: work out the shrunken Personal Allowance at each income level.
- At £110,000, you're £10,000 over the £100,000 threshold. The allowance shrinks by £1 for every £2 over, so it drops by £5,000, down to £7,570.
- At £115,000, you're £15,000 over the threshold, so the allowance drops by £7,500, down to £5,070.
Step 2: work out the Income Tax bill at £110,000.
Once you know the allowance, the rest of the calculation follows the normal bands from the Income Tax page: 0% on the allowance itself, then 20% on the next £37,700 of taxable income, then 40% on everything above that (this example doesn't reach the additional rate threshold, so 45% doesn't come into it):
| Band | Range | Width | Rate | Tax |
|---|---|---|---|---|
| Personal Allowance | £0 – £7,570 | £7,570 | 0% | £0 |
| Basic rate | £7,570 – £45,270 | £37,700 | 20% | £7,540 |
| Higher rate | £45,270 – £110,000 | £64,730 | 40% | £25,892 |
| Total | £33,432 |
Step 3: do the same calculation at £115,000.
| Band | Range | Width | Rate | Tax |
|---|---|---|---|---|
| Personal Allowance | £0 – £5,070 | £5,070 | 0% | £0 |
| Basic rate | £5,070 – £42,770 | £37,700 | 20% | £7,540 |
| Higher rate | £42,770 – £115,000 | £72,230 | 40% | £28,892 |
| Total | £36,432 |
Notice the basic-rate band tax is identical (£7,540) in both cases, because it's always exactly £37,700 wide, it just sits £2,500 lower down the income scale at £115,000 than at £110,000, since that's how much further the allowance has shrunk. All of the difference between the two totals comes from the 40% band.
Step 4: compare the two totals.
- Income Tax bill at £115,000: £36,432
- Income Tax bill at £110,000: £33,432
- The difference is the Income Tax on your £5,000 bonus: £3,000
That's 60% of the £5,000 bonus gone to Income Tax alone, exactly matching the effective marginal rate described above. Add employee National Insurance on top, 2%, since you're already above the Upper Earnings Limit (see National Insurance Explained), and a further £100 goes in NI, taking the combined rate to 62%.
The £5,000 bonus that looked like a £5,000 pay boost ends up putting only £1,900 in your pocket, 38p in every pound, once Income Tax and National Insurance are both accounted for.
How the effective rate moves through the band
The 60% effective rate is the highest marginal rate anywhere in the Income Tax system, higher than the 45% additional rate that applies above £125,140. It isn't a gradual climb either: the rate steps straight up to 60% the instant you cross £100,000, stays flat at 60% throughout the band (because you lose Personal Allowance at the same steady rate all the way through it), then steps back down to 45% (the additional rate) once the allowance has been fully withdrawn at £125,140. See Family & Household Examples for a full breakdown of a £115,000 earner sitting right in the middle of this band.
Marginal Income Tax rate by income. Drag the marker below, or use the slider, to see the exact rate at any point.
At £115,000.00: a marginal Income Tax rate of 60%.
Of the next £1,000 you earn here, £600.00 goes to Income Tax, you keep £400.00.
What you can do about it
The 60% trap only bites on income that falls within that £100,000–£125,140 band, so the most common way to reduce its impact is to reduce your adjusted net income below £100,000, most typically through pension contributions, which come off your income before this calculation is made. See Reducing Your Tax Through Pensions for exactly how that works, with a worked example.
It's also worth checking your tax code if you're in this band, because HMRC doesn't always adjust it automatically for a bonus or pay rise that pushes you into taper territory, which can mean you underpay during the year and get an unexpected bill later. See Understanding Your Tax Code.
If you have children and claim Child Benefit, there's a second, separate stealth marginal rate lower down the income scale, between £60,000 and £80,000: the High Income Child Benefit Charge. It's driven by the same adjusted net income figure as this taper, just at a different threshold, so the same pension contribution that helps here can help there too, depending on where your income actually falls.
This page explains general Income Tax rules for employees and is not personalised advice; see the disclaimer.