Why you pay 60% tax between £100k and £125,140

HMRC tapers the personal allowance (£12,570) by £1 for every £2 of income above £100,000. This means the allowance reaches zero at £125,140. The problem: as each £2 of additional income is taxed at 40% and £1 of personal allowance is removed — taxing another £1 at 40% — the effective marginal rate becomes 40% + 20% = 60% on every pound earned between £100,000 and £125,140.

This means someone earning £125,140 pays exactly the same income tax as someone earning £125,141 or more — their personal allowance has been entirely withdrawn, and the 40% rate applies to the full additional rate band from there.

The Escape Routes

Pension contributions reduce your “adjusted net income” — the figure used to calculate the taper. A £10,000 pension contribution from someone earning £110,000 reduces ANI to £100,000, restoring the full personal allowance and saving up to £6,000 in tax. Gift Aid donations work similarly. Both must be made before 31 January following the tax year end to count.

Frequently asked questions

What counts as “adjusted net income” for the taper?
Adjusted net income is your total income from all sources (salary, bonuses, dividends, rental income, savings interest) minus pension contributions and the grossed-up value of Gift Aid donations. Benefits in kind (P11D) count toward ANI. If you have a large bonus pushing you above £100,000, you may be able to make a one-off pension contribution to bring ANI back down below the threshold. Note: employer pension contributions (salary sacrifice) also reduce ANI.
Does this affect Child Benefit too?
The High Income Child Benefit Charge (HICBC) applies if either parent earns over £60,000 (adjusted from £50,000 from April 2024). If you receive Child Benefit and your income is between £60,000 and £80,000, you must repay 1% of it for every £200 of income above £60,000 — and you repay all of it above £80,000. This creates a further effective rate increase on top of the 60% trap for those in both income bands. See our Child Benefit & HICBC Calculator for the full picture.