Somewhere between £100,000 and £125,140 of income, the UK tax system does something most people don't expect: it taxes the next pound you earn at an effective rate higher than the official top rate of Income Tax. Not 45%, not 40%, but 60%. It's one of the strangest quirks in the entire system, it catches people off guard almost every time a pay rise or bonus pushes them into this zone, and for parents of young children it can be considerably worse than the headline number suggests.
This guide walks through exactly why it happens, what it costs in real terms, and the standard way people reduce or avoid it. For how it affects your own salary, use our take-home pay calculator, or model a fix directly with our Salary Sacrifice Planner.
Why 60%, Exactly?
The trap isn't a special tax rate that HMRC applies. It's a side effect of how the Personal Allowance, the first £12,570 of income that's normally tax-free, gets withdrawn once you earn over £100,000.
For every £2 you earn above £100,000, you lose £1 of that tax-free allowance. So earning an extra £2 doesn't just get taxed at the normal 40% higher rate, it also drags £1 of previously tax-free income into the taxable pool, and that £1 gets taxed at 40% too. Combine the two effects and you're paying 40% tax on the £2 you earned, plus 40% tax on the extra £1 that just became taxable, working out at £1.20 of tax on every £2 earned. That's an effective marginal rate of 60%.
The allowance keeps shrinking as income rises, £1 for every £2 earned, until it hits zero entirely at £125,140. At that point there's nothing left to lose, so the 60% effect stops. Somewhat counterintuitively, the marginal rate actually falls once you clear £125,140, dropping to 45%, the additional rate. So the sequence as income rises isn't a steady climb, it's 40%, then a spike to 60% for this one specific £25,140 stretch, then back down to 45%. A lot of people assume tax just keeps getting worse the more you earn, but this particular band is a localised spike, not part of a continuous trend.
To make it concrete: someone earning exactly £100,000 who then earns £2 more pays an extra £1.20 in tax on that £2, precisely 60%, not the 40% their tax code might suggest. Earn £2,000 more instead of £2 and the same ratio holds, £1,200 of it disappears in tax, leaving £800 in your pocket from a £2,000 pay rise.
The shape of it: 40% up to £100,000, 60% from £100,000 to £125,140, then 45% above that. The worst marginal rate in the entire UK Income Tax system sits in the middle, not at the top.
What It Actually Costs
Here's the effective marginal rate at a few points inside and around the trap zone, assuming no student loan.
| Income | Marginal rate |
|---|---|
| £90,000 | 40% |
| £105,000 | 60% |
| £115,000 | 60% |
| £130,000 | 45% |
If you also have a student loan, it's worse. Student loan repayments are calculated on top of Income Tax and National Insurance, not instead of them, so someone on a Plan 2 loan earning inside the trap zone faces an effective marginal rate of around 69%, not 60%. For a small number of people with high student loan balances and salaries in this band, take-home pay on a pay rise can end up below a third of the gross amount.
The Childcare Cliff-Edge Makes It Worse
For parents of young children, £100,000 isn't just where the Personal Allowance starts tapering. It's also where two separate childcare benefits disappear entirely, and unlike the Personal Allowance, they don't taper away gradually. They stop dead.
Tax-Free Childcare, worth up to £2,000 a year per child, and the 30 hours of free childcare a week available to working parents of children aged nine months to four years, both use the same £100,000 adjusted net income test as the Personal Allowance taper. But where the Personal Allowance shrinks gradually over £25,140 of income, childcare support falls off a cliff at exactly £100,000. Cross the line by £1 and you can lose both benefits in full, not just a proportional slice of them.
Crucially, this is tested per parent, not per household. If one parent in a couple earns £100,001 and the other earns £40,000, the family loses the childcare support entirely, even though combined household income might be far lower than another family where both parents earn £90,000 each and keep every penny of it.
For a family with two young children relying on the full 30 hours plus Tax-Free Childcare, the value lost can run well into five figures a year, on top of the 60% marginal rate already biting on the income itself. It's genuinely one of the most punishing cliff-edges in the UK system, and it's a large part of why a small pay rise around £100,000 can leave some parents worse off in practical terms than staying just under the line.
The Standard Fix: Pension Contributions
Both the Personal Allowance taper and the childcare cliff-edge use the same measure of income: adjusted net income, which is your salary minus certain deductions, most importantly pension contributions made through salary sacrifice or that otherwise reduce your taxable income.
That means increasing pension contributions to bring adjusted net income back under £100,000 fixes both problems simultaneously. Every pound sacrificed into a pension while inside the trap zone effectively saves 60p in tax that would otherwise be lost, and if it's enough to bring you back under £100,000 entirely, it can also restore childcare entitlements worth thousands more on top. For how salary sacrifice works more broadly, including what else qualifies for the same tax treatment, see our salary sacrifice explained guide.
This isn't a loophole or an aggressive tax planning strategy, it's simply how the system is designed to work, and it's the single most common piece of advice given to anyone in this income band. The maths usually works out heavily in favour of contributing, since the effective return, tax relief plus National Insurance savings plus potentially restored childcare, is far higher than most other ways of using the same money.
Ask your employer: If a bonus is what's pushing you into the trap zone, ask whether it can be paid directly into your pension through salary sacrifice rather than as cash. Many payroll systems can redirect some or all of a bonus this way if you request it before the bonus is paid, and it avoids the 60% band entirely rather than clawing money back afterwards. See our bonus tax guide for why a bonus payslip often looks more heavily taxed than it actually is.
Worked Example
Someone earning £110,000 sits £10,000 into the trap zone. Their effective marginal rate on that slice is 60%, meaning £6,000 of it goes to tax, leaving £4,000 in their pocket.
If instead they sacrifice £10,000 into their pension, their adjusted net income drops back to £100,000, clearing the trap zone entirely. The £10,000 goes into their pension pot rather than their bank account today, but none of that 60% marginal rate applies to it, and if they have young children, this same move can also restore Tax-Free Childcare and the 30 free hours, worth thousands more on top of the tax saving itself.
Common Mistakes People Make
A lot of people assume the 60% figure is a myth or an exaggeration, since it doesn't appear on any official tax table. It's real, it just isn't a rate HMRC publishes directly, it's the combined effect of two separate mechanisms working together, which is exactly why it catches so many people by surprise the first time a bonus or pay rise pushes them into this band.
It's also easy to assume the trap only matters for the very wealthy. £100,000 sounds like a lot, but with fiscal drag pulling more salaries upward each year without the threshold itself moving, a growing number of ordinary senior professionals, not just high earners in the traditional sense, now pass through this band at some point in their career, often without planning for it in advance.
Finally, parents sometimes only discover the childcare cliff-edge after they've already lost the benefit, since unlike most tax changes it isn't something that shows up gradually on a payslip. Checking your adjusted net income against the £100,000 threshold before accepting a bonus or pay rise, not after, is the only way to avoid an unpleasant surprise.