60% Tax Trap Calculator 2026/27
Last updated: March 2026 — Rates for the 2026/27 tax year
If you earn between £100,000 and £125,140, you're caught in the "60% tax trap" — where your effective marginal tax rate spikes due to the loss of your personal allowance. Use this calculator to understand the impact and explore ways to reduce it.
How the 60% Tax Trap Works
Every UK taxpayer gets a personal allowance of £12,570 — income you pay zero tax on. But once your income exceeds £100,000, HMRC withdraws this allowance at a rate of £1 for every £2 you earn above the threshold. By £125,140 your personal allowance is completely gone.
This creates a hidden tax spike. In the £100,000–£125,140 band you pay 40% income tax on the extra earnings plus effectively pay another 20% on the allowance you've lost — totalling a 60% marginal rate (62% including 2% National Insurance).
| Income Band | Marginal Tax Rate | Includes |
|---|---|---|
| Up to £12,570 | 0% | Personal allowance |
| £12,571 – £50,270 | 20% | Basic rate + 8% NI |
| £50,271 – £99,999 | 42% | Higher rate + 2% NI |
| £100,000 – £125,140 | 62% | 60% tax trap + 2% NI |
| Above £125,140 | 47% | Additional rate + 2% NI |
How to Avoid the 60% Tax Trap
- Salary sacrifice into a pension: every £1 contributed reduces your taxable income by £1, potentially restoring your full personal allowance.
- Gift Aid donations: the grossed-up donation reduces your adjusted net income, which determines the personal allowance taper.
- Company directors can adjust salary/dividend timing to stay below £100,000 in any one tax year.
- Venture Capital Trust (VCT) or Enterprise Investment Scheme (EIS) investments can generate income tax relief that reduces your tax bill.
- Speak to a tax advisor — at these income levels, professional advice typically pays for itself many times over.
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Frequently Asked Questions
Why is there a 60% tax rate between £100k and £125k?▾
Your personal allowance of £12,570 is reduced by £1 for every £2 you earn above £100,000. This means you effectively pay 40% income tax plus 20% on the lost allowance, giving a marginal rate of 60% (plus 2% NI, making it 62% total).
How can I avoid the 60% tax trap?▾
The most common strategy is salary sacrifice into a pension. By reducing your adjusted net income to £100,000, you restore your full personal allowance. Gift Aid donations also reduce adjusted net income. Directors can also time salary and dividend payments to stay below the threshold.
Does Scotland have a higher tax trap?▾
Yes. Scottish taxpayers face an effective marginal rate of around 63.5% in the trap zone because the Scottish higher rate is 42% (vs 40% in England and Wales), combined with the 20% lost allowance and 2% NI.
What counts as income for the personal allowance taper?▾
The taper is based on your adjusted net income — total taxable income (salary, dividends, rental income, savings interest) minus personal pension contributions and Gift Aid donations. You can reduce your adjusted net income below £100,000 by making pension contributions.
Does the 60% trap apply to company directors?▾
Yes — and directors need to consider both salary and dividends together. If your salary plus dividends totals more than £100,000, the taper applies to the combined income. Directors with the flexibility to control their extraction timing can often avoid the trap by keeping total income at or below £100,000.
How much do I save by using salary sacrifice to avoid the trap?▾
Sacrificing £25,140 (the full width of the trap) saves approximately £15,084 in tax (60% of £25,140). More practically, if your income is £110,000, sacrificing £10,000 into a pension restores approximately £5,035 of personal allowance and saves around £6,000 in income tax plus NI savings on the contribution.