{"id":5830,"date":"2020-06-30T11:49:51","date_gmt":"2020-06-30T10:49:51","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=5830"},"modified":"2026-02-02T17:05:35","modified_gmt":"2026-02-02T17:05:35","slug":"what-is-the-60-percent-tax-trap","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/high-earner-tax-returns\/what-is-the-60-percent-tax-trap\/","title":{"rendered":"What is the 60% tax trap?"},"content":{"rendered":"\n

If you’re earning over \u00a3100,000, you might find yourself facing the dreaded 60% tax trap<\/strong>. This occurs because your personal allowance (the amount you can earn tax-free) reduces as your income surpasses \u00a3100,000. The higher your earnings, the more you lose out, effectively pushing your tax rate up to 60%.<\/p>\n\n\n<\/div> \n\n

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Hey, have you sorted your tax return yet?<\/h2>\n\n \n \n
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Avoid costly mistakes and let Taxfix take care of it for you. Our UK-accredited accountants make filing quick and stress-free, starting from just \u00a3119.<\/span><\/p>\n<\/div>\n <\/div>\n\n \n \n

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How does the 60% tax trap work?<\/h2>\n\n\n\n

Basically, everyone in the UK is entitled to an amount of money that\u2019s tax-free. This is called the Personal Tax Allowance<\/a> and it\u2019s worth \u00a312,570 this tax year. Over this, you pay tax in tranches, from 20% to 45% on your income, otherwise known as your taxable income.<\/p>\n\n\n<\/div> \n\n

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The <\/span>income tax<\/b> rates in the 2025\/26 tax year \ud83d\udc47<\/span><\/p>\n\n\n\n\n\n\n\n
Income<\/strong><\/td>\nTax rate<\/strong><\/td>\nTax band<\/strong><\/td>\n<\/tr>\n
Up to \u00a312,570<\/span><\/td>\n0%<\/span><\/td>\nPersonal allowance<\/span><\/td>\n<\/tr>\n
\u00a312,571 to \u00a350,270<\/span><\/td>\n20%<\/span><\/td>\nBasic rate<\/span><\/td>\n<\/tr>\n
\u00a350,271 to \u00a3125,140<\/span><\/td>\n40%<\/span><\/td>\nHigher rate<\/span><\/td>\n<\/tr>\n
over \u00a3125,141<\/span><\/td>\n45%<\/span><\/td>\nAdditional rate<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n <\/div>\n<\/div> \n\n
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Where does the 60% come from? Well, once you earn over \u00a3100,000, you start losing your tax-free Personal Allowance \u2013 one pound of allowance per every two pounds over this \u00a3100,000 threshold, resulting in an effective 60% tax trap<\/strong>. <\/p>\n\n\n\n

If you do the maths, this is an income tax rate of exactly 60% for the income between \u00a3100,000 and \u00a3125,140. And this doesn\u2019t include National Insurance<\/a>.<\/p>\n\n\n\n

This is the second highest tax rate in all of Europe. There is only one other place that has higher tax: Munkedal, a small region in Sweden with a population of 10,000, which has a staggering marginal tax rate of 70%.<\/p>\n\n\n

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What can you do to reduce your tax rate?<\/h2>\n\n\n\n

The good news is, there are a few ways to reduce your tax rate and sidestep the 60% tax trap<\/strong>. Here\u2019s what you can do:<\/p>\n\n\n\n

Here is our advice:<\/p>\n\n\n\n

1. Save more into your pension<\/h3>\n\n\n\n

Sure \u2013 saving money for retirement is the last thing on your mind when you\u2019re in your 20s or even 30s. It does sound like a bad deal: locking money until you\u2019re 55. In reality, it\u2019s one of the best ways to cut your tax bill.<\/p>\n\n\n\n

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