What is the 60% tax trap? The £100k tax trap explained

Figures correct for the 2026/27 tax year. Last checked against GOV.UK and HMRC on 23 October 2026.

6 min read

Information, not financial advice. Life Cashflow is not authorised by the FCA.

Short answer

What is the 60% tax trap?

The 60% tax trap is the effective income tax rate on income between £100,000 and £125,140 in England, Wales and Northern Ireland. The personal allowance falls by £1 for every £2 of adjusted net income above £100,000, so each extra £1 earned is taxed at 40% and also loses 50p of allowance, costing about 60p in tax.

Bar chart from the planner of the tax Priya pays each year, split by income tax band with National Insurance, in today's prices, from 2026/27 to 2060/61, with a line adding up the tax paid so far. Below it, a strip shows the highest income tax band each year. Priya, an invented example, earns £120,000 a year until stopping work at 60. From 2026/27 to 2029/30 the bars are between £40,243 and £42,782 a year and the strip shows the higher rate. After Priya stops work, no year's tax is more than £9,940. A solid line marks 2026/27, the year chosen for the detailed working. — In this example, Priya earns £120,000 a year until 60. In each of the 4 working years, from 2026/27 to 2029/30, adjusted net income is over £100,000, so part of the personal allowance is withdrawn, and the tax paid each year is between £40,243 and £42,782, in today's prices. Priya is an invented example, and the chart is an illustration of the planner's arithmetic, not a forecast.
Assumes 2.5% inflation a year and steady growth of 5% a year on pensions and ISAs, and 3% on the home, before charges. Tax rules are those for 2026/27 and later years as now legislated, and can change. Real returns vary, and the value of investments can go down as well as up.
Open this example in the plannerDownload Priya's example plan (a JSON file: in the planner, choose File, then Open a saved file)

Key facts

The personal allowance is £12,570 for 2026/27 and is reduced by £1 for every £2 of adjusted net income above £100,000.
It is gone entirely at £125,140 of adjusted net income.
Between £100,000 and £125,140 the effective marginal rate is 60% in England, Wales and Northern Ireland, because the lost allowance is taxed at 40% as well.
Adjusted net income is total taxable income less certain reliefs, including the grossed-up amount of pension contributions paid by relief at source and of Gift Aid donations.
The taper is worked out for each tax year on its own, so a one-off pension withdrawal or other income can put a single year in the band.

The 60% tax trap is the combined effect of the 40% higher rate of income tax and the withdrawal of the personal allowance, on adjusted net income between £100,000 and £125,140. It is not a separate tax. In that band each extra £1 of income costs about 60p in income tax in England, Wales and Northern Ireland, using the 2026/27 figures in the planner's tables.

How does the personal allowance taper work?

Everyone has a personal allowance of £12,570 in 2026/27. It is reduced by £1 for every £2 of adjusted net income above £100,000. At £125,140 it has gone completely.

Adjusted net income	Personal allowance
£100,000	£12,570
£110,000	£7,570
£120,000	£2,570
£125,140	£0

Where does the 60% come from?

Take an extra £2 of income in the band. Three things happen:

The £2 is taxed at the higher rate of 40%, which is 80p.
The personal allowance falls by £1, so £1 that was tax-free is now taxed at 40%, which is a further 40p.
The total is £1.20 of tax on £2 of income, which is 60%.

Earnings also pay National Insurance. Above the upper earnings limit the employee rate is 2%, so for an employee in the band the planner shows 62% taken from the next £1 of earnings: 60% income tax and 2% National Insurance.

The income tax part of the planner's year detail for Priya, an invented example, in 2026/27: income of £120,000 from employment, a personal allowance of £5,570, adjusted net income of £114,000, taxable income of £108,430, income tax by band, and a line saying that income tax and National Insurance together take 62% of the next £1 of earnings, with the higher rate the highest band reached. — In this example, Priya earns £120,000 in 2026/27 and pays into a workplace pension from pay before tax, so adjusted net income is £114,000. The personal allowance falls by £7,000, from £12,570 to £5,570, and the planner shows 62% taken from the next £1 of earnings: 60% income tax and 2% National Insurance. Priya is an invented example, and the year detail is an illustration of the planner's arithmetic, not a forecast.
Assumes 2.5% inflation a year and steady growth of 5% a year on pensions and ISAs, and 3% on the home, before charges. Tax rules are those for 2026/27 and later years as now legislated, and can change. Real returns vary, and the value of investments can go down as well as up.
Open this example in the plannerDownload Priya's example plan (a JSON file: in the planner, choose File, then Open a saved file)

What reduces adjusted net income?

Adjusted net income is the figure the taper is measured against. GOV.UK describes it as total taxable income before any personal allowances, less certain tax reliefs, and works it out in four steps:

Add up taxable income, such as earnings, pensions, savings interest and dividends, and take off reliefs such as trading losses and pension contributions paid gross. This is "net income".
Take off the grossed-up amount of Gift Aid donations: £1.25 for every £1 given.
Take off the grossed-up amount of pension contributions where the pension provider has already given basic-rate relief at source: £1.25 for every £1 paid.
Add back any relief for payments to trade unions or police organisations taken off at step 1.

Pension contributions made through a workplace net pay arrangement, or by salary sacrifice, come out of pay before tax, so the pay counted is lower to begin with.

This describes how the rule works. It is not a suggestion. Money paid into a pension cannot normally be taken until the minimum pension age, contributions have their own limits, and whether any of this suits someone depends on their circumstances. In the second picture below, the same invented person's spare income is paid into a pension, which is the planner's starting order for spare income.

The income tax part of the planner's year detail for Priya, an invented example, in 2026/27, with spare income paid into a pension: income of £120,000 from employment, the full personal allowance of £12,570, adjusted net income of £71,803, and a line saying that income tax and National Insurance together take 42% of the next £1 of earnings. — In this example, the same person's spare income is paid into a pension by relief at source: £42,197 gross in 2026/27. Under the rules, gross contributions of that kind reduce adjusted net income, here to £71,803, so the full £12,570 personal allowance applies and the planner shows 42% taken from the next £1 of earnings. Priya is an invented example, and the year detail is an illustration of the planner's arithmetic, not a forecast.
Assumes 2.5% inflation a year and steady growth of 5% a year on pensions and ISAs, and 3% on the home, before charges. Tax rules are those for 2026/27 and later years as now legislated, and can change. Real returns vary, and the value of investments can go down as well as up.
Open this example in the plannerDownload Priya's example plan (a JSON file: in the planner, choose File, then Open a saved file)

Can a pension withdrawal put one year in the band?

Yes. The taper is worked out for each tax year on that year's adjusted net income. Taxable pension withdrawals count as income in the year they are taken, so a large withdrawal, a bonus or other one-off income can put a single year in the band even when every other year is well below £100,000. How much tax will I pay on my pension? explains how pension income is taxed more generally.

Bar chart from the planner of the tax Kim pays each year, split by income tax band, in each year's prices, from 2026/27 to 2049/50, with a line adding up the tax paid so far. Below it, a strip shows the highest income tax band each year. Kim, an invented retired example, pays for home improvements costing £80,000 in today's prices from a personal pension in 2027/28. That year's bar, £34,888 of income tax, is far taller than any other, and the strip shows the higher rate only in that year. A solid line marks 2027/28, the year chosen for the detailed working. — In this example, Kim is retired and usually has adjusted net income of between £30,998 and £62,132 a year. In 2027/28, home improvements costing £80,000 in today's prices are paid for from a personal pension, so adjusted net income that year is £112,583, over £100,000, and income tax is £34,888. Amounts are in each year's prices. Kim is an invented example, and the chart is an illustration of the planner's arithmetic, not a forecast.
Assumes 2.5% inflation a year and steady growth of 5% a year on pensions, and 3% on cash and the home, before charges. Tax rules are those for 2026/27 and later years as now legislated, and can change. Real returns vary, and the value of investments can go down as well as up.
Open this example in the plannerDownload Kim's example plan (a JSON file: in the planner, choose File, then Open a saved file)

In Kim's example the money comes from a personal pension that pays a quarter of each withdrawal tax-free, and the rest is taxed as income in that year. The year detail shows the working.

The income tax part of the planner's year detail for Kim, an invented retired example, in 2027/28, in each year's prices: income from a defined benefit pension, the State Pension and £81,037 of taxable pension withdrawals, a personal allowance of £6,278, adjusted net income of £112,583, income tax by band, and a line saying that 60% is taken from the next £1, with the higher rate the highest band reached. — In this example, Kim pays for home improvements from a personal pension in 2027/28, at 68. A quarter of each withdrawal is tax-free, so that year's withdrawals are £27,012 of tax-free cash and £81,037 taxed as income, and adjusted net income is £112,583. The personal allowance falls from £12,570 to £6,278, and the planner shows 60% taken from the next £1. Amounts are in each year's prices. Kim is an invented example, and the year detail is an illustration of the planner's arithmetic, not a forecast.
Assumes 2.5% inflation a year and steady growth of 5% a year on pensions, and 3% on cash and the home, before charges. Tax rules are those for 2026/27 and later years as now legislated, and can change. Real returns vary, and the value of investments can go down as well as up.
Open this example in the plannerDownload Kim's example plan (a JSON file: in the planner, choose File, then Open a saved file)

What this looks like in the planner

The planner applies the taper in every year of a plan, for each person, and shows the result on the Tax view:

Tax paid each year. The picture at the top shows Priya, who earns £120,000 until 60. The four working years are the tall bars, and the strip under the chart shows the highest band reached each year.
The year detail. Choosing a year shows the personal allowance after the taper, adjusted net income, the tax in each band, and the rate on the next £1.
Later years. The planner keeps the £100,000 limit at £100,000 in every year. From April 2031 it raises the personal allowance and the bands with its inflation assumption, unless they are set to stay frozen.

Open Priya's example in the planner to see the year detail for 2026/27, or open Kim's example to see the year of the withdrawal. Both are invented, and you can change any figure in them. What the planner simplifies or leaves out lists the tax rules it does not model, such as Gift Aid.

What are the current figures?

The table below comes from the same tables the planner uses, for the 2026/27 tax year.

Income tax (England, Wales and Northern Ireland), 2026/27
Personal allowance	£12,570
Allowance reduced above income of	£100,000
Marriage Allowance transfer	£1,260
Basic rate	20% on the first £37,700
Higher rate	40% from £37,700 to £125,140
Additional rate	45% above £125,140

Frequently asked questions

Why is it called a trap?

Because the headline higher rate is 40%, but in this band the withdrawal of the personal allowance adds a further 20 percentage points, so the rate on each extra pound is higher than the rate on income just below or just above the band.

Is the rate different in Scotland?

Yes. The personal allowance is withdrawn in the same way, but income in this band is taxed at the Scottish advanced rate of 45% in the 2026/27 tables the planner uses, so the effective rate is 67.5% rather than 60%.

What counts as adjusted net income?

Total taxable income, such as earnings, pensions, savings interest and dividends, before any personal allowances and less certain reliefs. GOV.UK lists trading losses, pension contributions paid gross, and the grossed-up amount of Gift Aid donations and of pension contributions paid by relief at source.

Do pension contributions reduce adjusted net income?

Some do, under GOV.UK's method. Contributions paid by relief at source are taken off, grossed up by the basic-rate relief, and so are contributions paid gross. Contributions through a net pay arrangement or salary sacrifice come out of pay before tax. Pension money cannot normally be taken before the minimum pension age, so whether paying more in suits anyone depends on their circumstances.

Can a pension withdrawal put someone in the 60% band?

Yes. Taxable pension withdrawals count as income in the tax year they are taken. In the planner's invented example, Kim's adjusted net income is between £30,998 and £62,132 in every other year, but in the year a large cost is paid from a pension it is £112,583, so part of the personal allowance is withdrawn that year.

Does the trap end at £125,140?

Yes. Once the personal allowance has been withdrawn in full there is nothing left to lose, so the effective rate falls back to the additional rate of 45% on income above £125,140.

Try this example in the planner

Priya's example opens on the Tax view, where the planner works out the personal allowance, adjusted net income and the rate on the next £1 for every year. Changing any figure shows how the result moves.

The example is invented. It opens as a scenario of its own that you can change, and anything of yours that is open stays as it is.

Open this example in the planner Start a plan of your own

Download Priya's example plan as a JSON file, and open it in the planner with File, then Open a saved file.

Sources

Checked against these sources on 23 October 2026, for the 2026/27 tax year.

Information, not financial advice. Life Cashflow is not authorised by the Financial Conduct Authority. This guide explains how UK rules work in general. It does not look at anyone's circumstances and does not say what anyone should do.

The examples are invented. Their charts and figures show the planner's arithmetic for the assumptions given, not a forecast or a promise of any outcome. Growth rates are assumptions: real returns vary, and the value of investments can go down as well as up. Tax rules are given for the 2026/27 tax year and can change.

Whether an option suits someone depends on their circumstances. Free, impartial guidance is available from MoneyHelper (opens in a new tab), and from Pension Wise (opens in a new tab) for people aged 50 or over with a defined contribution pension. Personal advice comes from a regulated financial adviser, usually for a fee, and the FCA Register (opens in a new tab) shows whether a firm is authorised.