What Is the 60% Tax Trap?

Created by Owen. Owen has been investing independently for seven years and built Your Wealth Calculator to share the tools he wished he had found earlier.

Reviewed 19 May 2026. Explains the Personal Allowance taper above £100,000 using UK 2026/27 rules.

The “60% tax trap” is not a separate tax band. It is the nickname for what happens when income above £100,000 starts to pull away your Personal Allowance.

For every £2 of adjusted net income above £100,000, the Personal Allowance is reduced by £1. By £125,140, the standard Personal Allowance has normally been fully withdrawn.

Why it feels worse than 40%

A higher-rate taxpayer may expect the next pound to face 40% Income Tax, plus National Insurance where relevant. Between £100,000 and £125,140, the Personal Allowance taper adds another layer: extra income also makes more of your existing income taxable.

The short version

You are taxed on the extra income and you lose some of the tax-free income you already had. That is why the effective marginal tax rate is much higher than the headline 40% rate.

Where pension contributions fit

Pension contributions can reduce adjusted net income. If a contribution brings adjusted net income back towards £100,000, it can restore some or all of the Personal Allowance. Salary sacrifice can be especially efficient because it can also reduce National Insurance.

The Salary Sacrifice Calculator is designed to show this visually by comparing the pension contribution with the take-home pay reduction.

Things to be careful about

Do not sacrifice so much that your short-term cash position becomes weak.
Check whether you are close to the pension annual allowance.
Remember pension access age ; most people cannot access private pensions until at least age 55, rising to 57 from 6 April 2028.
Check whether a lower salary affects mortgage borrowing or employment benefits.

Related calculators and guides

Sources and useful reading

Common questions

Questions that often follow once people understand the taper.

Why does the 60% tax trap start at £100,000?

Because the Personal Allowance is withdrawn once adjusted net income goes above £100,000.

Does the 60% tax trap affect Scotland?

The Personal Allowance taper is UK-wide, but Scottish income tax bands differ. The broad taper issue still matters, but the exact marginal rate may differ.

Can pension contributions reduce the 60% trap?

They can, because pension contributions may reduce adjusted net income. The result depends on contribution method, income and pension limits.

Final thought: The 60% trap is awkward because it is not a separate tax band. It comes from two rules colliding. That is why seeing the numbers visually can make the decision much clearer.