The 60% Tax Trap: What It Is, How It Works, and Who It Catches

If your income is between £100,000 and £125,140, you are paying an effective marginal income tax rate of 60%. Not 45%. Not 40%. Sixty per cent.

It is one of the most punishing features of the UK tax system, it affects a large and growing number of professionals, and most people caught in it have no idea it exists until a Self Assessment bill arrives that is significantly larger than they expected.

This guide explains exactly how the 60% tax trap works, who it catches, and what the planning window looks like before it closes on 5 April.

How the 60% tax trap works

The UK personal allowance is £12,570 for 2025/26. But it is not available to everyone. For every £2 your income exceeds £100,000, you lose £1 of personal allowance. By the time income reaches £125,140, the personal allowance has been withdrawn entirely.

That taper creates a brutal effective rate in the £100,000–£125,140 band:

• You pay 40% income tax on each additional pound of income
• Each £2 of additional income costs £1 of personal allowance — allowance that would otherwise be taxed at 0%. Losing £1 of allowance generates an additional 40p of tax
• Combined: 40p + 20p = 60p tax on each £1 of income in the band

Example: Income of £115,000. The £15,000 above £100,000 reduces the personal allowance by £7,500. Those £7,500 of allowance, now taxable at 40%, generate £3,000 of additional tax. Added to the 40% income tax on the £15,000 itself (£6,000): total tax on that £15,000 is £9,000. Effective rate: 60%.

The maths is unforgiving at every point in the band. There is no softer zone. Every pound between £100,000 and £125,140 is taxed at 60%.

Who is caught

The trap was introduced in 2010. The £100,000 threshold has never been uprated for inflation. Wages have risen. The number of people caught increases every year.

Those most commonly affected:

• Senior professionals in London and the South East — managers, directors, and executives in financial services, technology, law, and consulting, where salaries in the £100,000–£130,000 range are routine.
• NHS consultants and senior doctors — consultant grade salaries frequently fall in or above the band, particularly with private practice income on top.
• Partners in professional services — law firms, accountancy practices, and consultancies where partner drawings cross £100,000.
• Business owners and directors — salary plus dividends where total income crosses the threshold.
• Bonus and equity recipients — base salary below £100,000 but bonuses, share awards, or option vesting push total income into the band. Common in financial services and technology. Often a one-year event that catches people by surprise.
• Self-employed professionals — consultants and sole traders whose profits bring adjusted net income above £100,000.

Many people hit the trap for the first time in a year when something exceptional happens — a bonus, an IPO, an equity vesting. The first year is usually the most expensive, because there has been no planning in anticipation of it.

What EIS does and does not do in this context

EIS income tax relief reduces your income tax bill — it does not reduce adjusted net income. It therefore does not directly restore the personal allowance or escape the 60% trap in the same way pension contributions do.

However, for high earners who have already maximised pension contributions, EIS provides the next layer of income tax reduction. The 30% EIS income tax relief applies to your total income tax bill, including the inflated bill caused by the trap. Invest £50,000 in EIS and receive £15,000 off the tax bill — it does not eliminate the 60% marginal rate, but it reduces the overall amount owed.

The detailed planning strategies for high earners — combining pension contributions, salary sacrifice, Gift Aid, and EIS income tax relief to systematically reduce tax liability — are covered in our registered investor guide.

What to do if your income is approaching £100,000

1. Calculate your adjusted net income — not just gross earnings.
2. Check your pension annual allowance and available carry-forward.
3. Model what contributions would bring adjusted net income to £100,000 or below.
4. Consider Gift Aid if you already plan to make charitable donations.
5. If employed with a bonus coming, ask whether salary sacrifice arrangements can be made before year end.
6. Talk to an accountant or financial adviser before 5 April — not after.

The 60% trap is entirely legal, entirely predictable, and with the right planning often partially or fully avoidable. The cost of not planning is a tax bill that did not need to be that large.