The UK income tax system has three official rates: 20%, 40%, and 45%. There is also an unofficial fourth rate that appears nowhere on any standard tax table: 60%. It applies to every pound you earn between £100,000 and £125,140. In 2025–26, HMRC estimates 1.12 million people had income in this band — up from 754,000 three years ago. 77,000 pensioners are now caught in it. And with thresholds frozen until at least 2031, the number forecast to be affected by 2028–29 is 850,000. This guide explains the maths, the additional costs most people miss, and the legal strategies that eliminate the rate entirely.

Table of Contents

• The Tax Rate That Doesn’t Appear on Any Table
• The Maths: How 40% Becomes 60%
• Why the Number Is Actually Higher: NI, Scotland, and the True Marginal Rate
• Who Is Affected: 1.12 Million Taxpayers and Growing
• The Childcare Cliff: The Cost Most High Earners Don’t Count
• The High Income Child Benefit Charge: A Second Hidden Trap
• The Freeze Effect: How More People Fall In Every Year
• The Pension Solution: How Contributions Eliminate the 60% Rate
• Salary Sacrifice: The Most Efficient Route
• Pension Carry Forward: Going Beyond the £60,000 Annual Allowance
• Other Tools: Gift Aid, SIPP Contributions, and Timing Income
• The Full Picture: What You Save by Acting
• Traps Within the Trap: What to Watch Out For
• Conclusion: The Rate HMRC Never Advertises
• Frequently Asked Questions

Marginal Rate Across Income Spectrum (2026 / 27)

The Growing Scale of The Trap: People affected (2017 - 2029)

The Pension Solution: What £10k Contribution Actually Cost

The Tax Rate That Doesn’t Appear on Any Table

Open any UK government publication on income tax and you will find three rates: 20% (basic rate), 40% (higher rate), and 45% (additional rate). There is no mention of 60%. Yet for the 2026–27 tax year, every pound earned between £100,000 and £125,140 is subject to a 60% effective marginal tax rate — the highest in the UK income tax system, higher even than the 45% additional rate charged on income above £125,140.

The 60% rate does not appear in HMRC publications because it is not a formally legislated rate. It is an emergent effect — created by the interaction of two rules that are individually uncontroversial but combined produce a marginal rate of extraordinary severity. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, describes it precisely: ‘The 60% tax trap is the ultimate stealth tax nibbling away at your income.’

HMRC’s own estimates show that approximately 1.12 million people had taxable income over £100,000 in 2025–26 — up from 754,000 just three years earlier in 2022–23 (saga.co.uk, October 2025, citing HMRC). Almost 725,000 are estimated to fall squarely in the 60% trap band between £100,000 and £125,140 in 2025–26 — more than double the 300,000 affected in 2017–18 (loveelectric.cars, June 2026). And the number is forecast to reach 850,000 by 2028–29, because the £100,000 threshold is frozen until at least April 2031 while wages continue to rise. More people fall into the trap every year without any change to the rules, simply because salaries increase.

People with income over £100,000 in 2025–26: 1.12 million (HMRC; saga.co.uk Oct 2025). In the 60% trap band: ~725,000 in 2025–26 (double the 300,000 in 2017–18; loveelectric.cars Jun 2026). Forecast trapped by 2028–29: 850,000. Pensioners (66+) caught: 77,000 in 2024–25 (+13% YoY; +126% since 2020; HMRC to Interactive Investor). Thresholds frozen until: at least April 2031.

The Maths: How 40% Becomes 60%

The 60% effective marginal rate arises from the interaction of two rules:

Rule 1 — The Personal Allowance taper: Under S35 and S36 of the Income Tax Act 2007, the Personal Allowance of £12,570 (2026–27) is reduced by £1 for every £2 of adjusted net income above £100,000. By the time income reaches £125,140, the Personal Allowance has been reduced to zero: (£125,140 − £100,000) ÷ 2 = £12,570.

Rule 2 — Higher rate tax on the income in that band: Every pound earned between £100,000 and £125,140 already falls within the 40% higher rate band. Tax of 40% is therefore paid on each pound of gross income in this range.

The combination: for each £1 earned above £100,000, HMRC collects:

• 40p in income tax on the marginal pound itself.
• An additional 20p because 50p of Personal Allowance is lost, and that lost allowance — which would have been tax-free — is now taxed at 40%: 50p × 40% = 20p.

Total: 40p + 20p = 60p from each £1 earned. Effective marginal rate: 60%.

Example: A concrete illustration: your salary is £100,000. You receive a £1,000 pay rise, bringing it to £101,000. The extra £1,000 falls in the 60% band. Higher-rate tax on the marginal £1,000: £400. Loss of personal allowance: £500 (because income rose by £1,000, you lose £500 of PA). That £500 of lost PA is now taxed at 40%: £200. Total additional tax: £400 + £200 = £600. Net income increase from a £1,000 pay rise: £1,000 − £600 = £400. Effective tax rate: 60%. Source: salarytax.uk (April 2026); themgroup.co.uk (April 2026).

How 60% emerges: 40% tax on the marginal pound + 20% from the lost Personal Allowance (50p PA × 40% tax) = 60p lost from every £1 earned between £100,000 and £125,140. A £1,000 pay rise in this band produces £400 take-home — you pay £600 to HMRC. The 60% band spans £25,140 of income. A £25,140 pay rise across the full band adds only £9,553 of take-home (salarytax.uk). The other £15,587 goes to HMRC.

Why the Number Is Actually Higher: NI, Scotland, and the True Marginal Rate

The 60% rate cited above is the income tax effect alone. When other deductions are included, the effective rate is higher still:

• Employee National Insurance: the NI rate on earnings between the upper earnings limit (approximately £50,270 in 2026–27) and £125,140 is 2%. The total effective marginal rate including NI is therefore approximately 62% in England, Wales, and Northern Ireland (salarytax.uk; afterax.com, April 2026).
• Scotland: Scotland has its own income tax bands. In 2026–27, Scottish higher rate is 42% (versus 40% in England). The same Personal Allowance taper applies, but at the Scottish higher rate the effective marginal rate becomes approximately 67.5% within the £100,000–£125,140 band (Fidelity UK, February 2025; loveelectric.cars, June 2026; uktaxdrag.co.uk, May 2026). Adding Scottish NI pushes this to approximately 67–62% combined depending on NI exposure. The Scottish income tax rates were higher at 42% (higher), 45% (advanced rate above £75,000) and 48% (above £125,140) for 2026–27.
• The childcare cliff (detailed in Section 5): for parents with children under 4 (in England), crossing £100,000 means losing Tax-Free Childcare (up to £2,000 per child per year) and 30 hours of free childcare worth up to £6,000 per child per year. These are not tax — but they are real financial costs triggered by the same £100,000 threshold.

Source: salarytax.uk (April 17, 2026); uktaxdrag.co.uk (May 2, 2026); afterax.com (April 30, 2026); loveelectric.cars (June 29, 2026); Fidelity UK (February 2025). Figures for 2026–27 tax year. Scottish rates are complex — consult a tax professional for personal advice.

Who Is Affected: 1.12 Million Taxpayers and Growing

The 60% trap is often described in media as a problem for ‘top earners’ or ‘City professionals.’ That characterisation understates who is actually affected. The £100,000 threshold was introduced in 2010 and has never been uprated for inflation. Over 16 years, as earnings have grown, it has captured an ever-widening population of earners who would not traditionally have considered themselves ultra-high earners:

• Senior professionals: experienced solicitors, accountants, doctors (particularly those with significant NHS work), engineers, and IT architects increasingly reach this level in their late 30s and 40s.
• Senior managers and directors: many senior management roles in medium and large organisations now carry total compensation — including bonuses and benefits in kind — above £100,000.
• Business owners: those who draw a salary and dividends from their own company may find the combined figure crossing £100,000 in profitable years.
• Pensioners: perhaps the most overlooked group. Defined benefit pension income combined with State Pension (£241.30/week in 2026–27) and investment income can push some retirees into this band. 77,000 pensioners aged over 66 were caught in 2024–25 — up 126% since 2020 (saga.co.uk, citing HMRC).
• Those with one-off income spikes: a bonus payment, vested stock options, rental income from a property sale year, an inheritance distribution, or a self-employed strong year can push someone into the band unexpectedly in a single tax year, even if their regular income is below £100,000.

The freeze mechanism ensures the trap keeps growing. With income tax thresholds frozen until at least April 2031, every year of wage growth at any rate above zero draws more people in. The Institute for Fiscal Studies and multiple commentators have described this as a form of ‘fiscal drag’ — one of the most effective but least visible mechanisms for increasing the tax take without changing any rate.

The Childcare Cliff: The Cost Most High Earners Don’t Count

The £100,000 threshold is not only a tax boundary. It is also the cliff edge for two valuable childcare benefits, and the combined value of these benefits means that the true cost of crossing £100,000 for parents of young children substantially exceeds the 60% income tax effect alone.

The two childcare benefits lost at £100,000 adjusted net income:

• Tax-Free Childcare (TFC): the government contributes £2 for every £8 deposited into a Tax-Free Childcare account, up to a maximum government contribution of £2,000 per child per year (£4,000 per year for disabled children). Crossing £100,000 means losing this benefit entirely — for every child under 12 (under 17 for disabled children) in the household.
• 30 hours free childcare (England): families with 3–4 year-olds (and since April 2024, extended to babies from 9 months old) in England are entitled to 30 hours of funded childcare per week during term time, worth approximately £6,000 per child per year. This entitlement is withdrawn when either parent’s adjusted net income exceeds £100,000.

Lloyds Bank’s guide to the 60% tax trap (updated two weeks before publication of this article) illustrates the real-world impact with a concrete example: ‘Jane takes a promotion, increasing her yearly income from £90,000 to £105,000 each year. This tips her over the £100,000 threshold. As a result, she loses her entitlement to 30 hours of free childcare every week.’

Example: True cost of crossing £100,000 for a parent of two under-3s (England, 2026–27, illustrative): Income tax effect: 60% marginal rate on income above £100,000. Tax-Free Childcare loss: £2,000 × 2 children = £4,000 per year. 30 hours free childcare loss: £6,000 × 2 children = £12,000 per year. Total effective loss from the £100,000 crossing point: £16,000 per year in benefits foregone + 60% on every pound earned above £100,000. For a parent earning £105,000, the £5,000 above the threshold costs £3,000 in income tax (60%) plus £16,000 in lost childcare benefits = £19,000 impact from a £5,000 income increase. The childcare element can be reversed entirely by making pension contributions that bring adjusted net income back below £100,000. Source methodology: SJP December 2025; lloydsbank.com; loveelectric.cars June 2026.

The 30 hours free childcare and Tax-Free Childcare rules depend on BOTH parents' income where applicable. If either parent's adjusted net income exceeds £100,000, both benefits are lost regardless of the other parent's income. This means a household where one partner earns £102,000 and the other earns nothing still loses all childcare entitlements. The only remedy is reducing the higher earner's adjusted net income below £100,000 through pension contributions, salary sacrifice, or Gift Aid.

The High Income Child Benefit Charge: A Second Hidden Trap

The High Income Child Benefit Charge (HICBC) operates separately from the Personal Allowance taper but creates its own effective marginal rate for those with children who receive Child Benefit. For 2026–27, the HICBC applies where the higher-earning partner’s adjusted net income exceeds £60,000, and Child Benefit is fully clawed back above £80,000.

Child Benefit rates for 2026–27: £27.05 per week for the eldest child (£1,406.60 per year); £17.90 per week for each subsequent child (£930.80 per year). For a family with three children, total Child Benefit is approximately £3,268 per year. Between £60,000 and £80,000 of adjusted net income, this entire sum is progressively reclaimed via the HICBC, creating an additional effective marginal rate of approximately 16–18% in that band depending on the number of children — and a combined marginal rate of up to 58% within the HICBC withdrawal zone (canaccord-wealth.com).

The HICBC interacts with the £100,000 trap for those in the £100,000–£125,140 band who also claimed Child Benefit before their income reached £80,000 and have not subsequently opted out. While the direct Child Benefit effect is fully spent by £80,000 for most families, it is important in planning for those whose income is rising through the £60,000–£80,000 range: pension contributions in that range reduce adjusted net income and can preserve meaningful amounts of Child Benefit.

The Freeze Effect: How More People Fall In Every Year

The £100,000 threshold above which the Personal Allowance begins to taper has not changed since it was introduced in April 2010. The Personal Allowance itself has been frozen at £12,570 since 2021–22 and is scheduled to remain frozen until at least April 2031 — a full decade of freezing that represents the longest sustained freeze in the history of the UK income tax threshold.

The consequence of the freeze is fiscal drag. If average annual earnings growth is 3%, a worker earning £96,000 today crosses £100,000 in approximately 14 months. That is not a deliberate career decision — it is the effect of normal wage growth interacting with a stationary threshold. The IFS has estimated that threshold freezes are the single most significant driver of the increasing personal tax burden over the current parliament.

The loveelectric.cars analysis (June 29, 2026) projects the trajectory explicitly: ‘Almost 725,000 workers fall into the 60% tax trap in 2025–26, more than double the 300,000 caught in 2017–18. That number is forecast to reach 850,000 by 2028–29, with frozen thresholds locked in until at least 2031 continuing to drag more people in every year.’

The freeze makes the 60% trap an accelerating problem, not a static one. Every year of wage growth — regardless of policy announcements — draws more people into the band. A professional earning £95,000 today who receives normal annual pay increases of 3% will cross the £100,000 threshold in approximately 18 months and will spend years in the 60% band before (if ever) exiting above £125,140. The most important implication: planning for the £100,000 trap should begin before the threshold is crossed, not after.

The Pension Solution: How Contributions Eliminate the 60% Rate

The most direct and most powerful method for eliminating the 60% effective marginal rate is making pension contributions that reduce adjusted net income below £100,000. The mechanism is straightforward: HMRC uses ‘adjusted net income’ (ANI) — not gross salary — to determine Personal Allowance entitlement. Pension contributions — whether made directly to a pension or via salary sacrifice — reduce ANI pound for pound. Reduce ANI below £100,000 and the taper stops; the full Personal Allowance is restored.

The effective tax relief on pension contributions made within the 60% band is therefore 60% (the rate at which every pound contributed saves tax), making pension saving in this band the single most tax-efficient savings mechanism available anywhere in the UK — and one of the highest-return financial decisions available to any earner in this position.

Example: Fidelity UK example (February 2025): An employee earns £110,000 and wants to reduce taxable income to £100,000 to exit the 60% band. They make an additional pension contribution of £8,000 from their own funds. HMRC tops up with 20% basic-rate relief, making the gross contribution £10,000. On their Self Assessment, they claim the remaining 20% higher-rate relief: £2,000 rebate. Net cost of £10,000 pension contribution: £8,000 gross less £2,000 rebate = £6,000 net. But they also regain the £5,000 of Personal Allowance that was being eroded, saving a further £2,000 in income tax (£5,000 × 40%). Effective cost of putting £10,000 into pension: £6,000 − £2,000 = £4,000. That is a 60% effective tax relief rate — the same rate at which they were losing the money before. Every £10,000 contributed in this band costs £4,000 in cash after all reliefs. Illustrative; not personal financial advice. Source: Fidelity UK (February 2025).

Fidelity UK’s guide, published on this topic specifically, puts it plainly: ‘In a word: by making pension contributions. Paying money into a pension reduces your effective taxable income and, if your pension contributions reduce your taxable income to less than £100,000, your personal allowance will be restored in full.’

The calculation for your situation: (your adjusted net income) minus (pension contributions needed to reach £100,000). If your income is £110,000, you need £10,000 of pension contributions (gross, including tax relief) to bring ANI to £100,000. For a personal pension or SIPP, you pay in 80% of the gross amount and HMRC adds 20% basic-rate relief. The remaining higher-rate relief is claimed via Self Assessment. Carry forward can allow much larger contributions in a single year. Consult a financial adviser to confirm the calculation for your specific circumstances.

Salary Sacrifice: The Most Efficient Route

Salary sacrifice is a contractual arrangement between employee and employer where the employee agrees to give up a portion of gross salary in exchange for a non-cash benefit — most commonly a pension contribution. The salary is reduced before tax is calculated, meaning it never appears as taxable income. The salaryincomecalculator.co.uk guide (updated August 2026) describes salary sacrifice as ‘one of the most effective ways to increase your take-home pay without earning more.’

For £100,000 trap earners, salary sacrifice has two advantages over a personal pension contribution:

• Immediate reduction in adjusted net income: the salary reduction takes effect at payroll, so HMRC sees a lower figure from the start. With a personal pension contribution, HMRC must first see the higher salary and then you reclaim the excess via Self Assessment.
• National Insurance savings for both employee and employer: salary sacrifice reduces the gross salary on which NI is calculated. The employee saves 2% NI on the sacrificed amount (within the relevant NI band). The employer saves 15% employer NI (the rate from April 2025). Many progressive employers pass some or all of this employer NI saving back into the employee’s pension, further enhancing the effective return.

CalcHub (2026–27 salary sacrifice guide) identifies the critical distinction: ‘Because it reduces adjusted net income pound-for-pound, sacrificing enough to bring income back to £100,000 reinstates the full Personal Allowance and removes the 60% rate. The effective relief on money sacrificed in this band can exceed 60% once NI and the reinstated allowance are counted — making it one of the highest-return financial moves available to anyone caught in this zone.’

Salary sacrifice has important side effects to consider before committing: it reduces the gross salary on which statutory maternity/paternity pay is calculated; it may affect mortgage affordability assessments (which are based on gross salary); student loan repayments are based on the sacrificed salary figure; and from April 2029, the NI-exempt amount for salary sacrifice is being capped at £2,000 per year (SJP December 2025). None of these is a reason to avoid salary sacrifice for the £100,000 trap — but they must be factored in for anyone with an imminent mortgage application, expected parental leave, or significant student loan balance.

Pension Carry Forward: Going Beyond the £60,000 Annual Allowance

The standard pension Annual Allowance for 2026–27 is £60,000. This is the maximum gross pension contribution (from all sources combined — employee, employer, and third party) that can be made in a single tax year and still receive tax relief. For someone earning £200,000 who has never used a pension, a single year’s allowance will not be enough to restore the full Personal Allowance.

Carry forward allows unused Annual Allowance from the three preceding tax years to be added to the current year’s allowance, subject to two conditions: you were a member of a registered pension scheme in those years (active, deferred, or paid-up), and your earned income in the current year is at least as large as the total contribution.

Fidelity UK’s example (February 2025) shows the scale of what is possible: ‘Someone who earns £200,000 could reduce this year’s taxable salary all the way down to £100,000 and therefore have their full personal allowance restored and avoid the 60% tax trap in its entirety (as well as the 45% tax band and the loss of childcare). To do so, they would first make an £80,000 contribution to their pension, knowing that HMRC will top it up to £100,000 thanks to basic-rate tax relief (for a non-workplace pension). On their tax return for this tax year, they would state that they are paying £100,000 into their pension (using this year’s full £60,000 annual allowance plus £40,000 from an earlier year).’

The carry forward window runs for three tax years. Each April — as the oldest year’s carry forward expires — the window shifts forward. Planning carry forward requires advance knowledge of what unused allowance is available in each of the three prior years, which your pension provider can confirm.

The pension Annual Allowance tapers for very high earners. If your 'adjusted income' (broadly, all income plus employer pension contributions) exceeds £260,000 in 2026–27, the standard £60,000 Annual Allowance begins to reduce by £1 for every £2 above that threshold, to a minimum of £10,000. This is a separate taper from the Personal Allowance taper. If you are in this category, the maths of carry forward is more complex and specialist advice is essential.

Other Tools: Gift Aid, SIPP Contributions, and Timing Income

Pension contributions are the primary tool for escaping the 60% trap, but they are not the only one. Three supplementary mechanisms:

• Gift Aid charitable donations: charitable donations made under Gift Aid extend the basic-rate tax band by the grossed-up value of the donation. A £8,000 Gift Aid donation (grossed up to £10,000 at 20% basic rate) extends the basic-rate band by £10,000. More importantly for this analysis, Gift Aid donations reduce adjusted net income, which reduces the Personal Allowance taper. A £10,000 Gift Aid payment (gross) reduces ANI by £10,000 and can be used in combination with pension contributions to bring ANI below £100,000. This is particularly useful when the pension Annual Allowance is already fully used. However, the donation is genuinely donated to charity — it is not recoverable. It represents genuine charitable intent plus a significant tax incentive.
• SIPP (Self-Invested Personal Pension) contributions: for those who are not employees or whose employer does not offer salary sacrifice, a personal SIPP contribution achieves the same ANI reduction as a salary sacrifice. The mechanics differ (80% paid in; 20% basic-rate added automatically; 20% higher-rate relief claimed via Self Assessment) but the end result is the same. A SIPP is accessible to anyone under 75 with UK earnings.
• Timing of income: for those with some control over when income is received — self-employed individuals, company directors paying themselves via dividends, those with discretionary bonuses, employees with RSU vesting schedules — deferring income into a tax year where the total stays below £100,000 avoids the trap without any pension contribution required. This requires proactive planning well before the tax year end (5 April) and is most effective when income is naturally lumpy or deferrable. The Afterax.com guide (April 2026) notes: ‘The trap also catches you if a one-off event pushes you above £100,000 in a single year — a property sale, a big bonus, vested stock options, an inheritance distribution, a tax year where multiple income sources stack. People often don’t see it coming because their salary alone is below the threshold.’

The Full Picture: What You Save by Acting

All figures are illustrative for the 2026–27 tax year, England/Wales/NI. Individual tax positions vary. Childcare benefit values are approximate. Not financial or tax advice. Consult a qualified adviser for calculations specific to your circumstances.

Traps Within the Trap: What to Watch Out For

The pension solution is highly effective but has specific rules that must be followed to avoid creating new problems:

• Annual Allowance: total pension contributions (employee + employer + third party) across all pensions cannot exceed £60,000 in 2026–27 (or the carry forward-enhanced amount) without triggering an Annual Allowance charge. Check the total before making additional contributions.
• Money Purchase Annual Allowance (MPAA): if you have already taken any flexible income from a defined contribution pension (flexibly accessed drawdown or UFPLS — uncrystallised fund pension lump sums), your MPAA is only £10,000. Salary sacrifice or additional pension contributions cannot exceed this without triggering a charge.
• Salary sacrifice minimum wage: salary sacrifice cannot reduce cash pay below the National Minimum Wage. Not a concern at these income levels in practice, but worth noting.
• Tax code timing: HMRC adjusts your PAYE tax code to collect tax on estimated income changes, but the adjustment may lag. If your income rises unexpectedly above £100,000 mid-year, HMRC may not collect the additional 60% marginal rate through PAYE — you will owe it via Self Assessment. File your return and pay any underpayment by 31 January following the tax year.
• Self Assessment registration: anyone with income over £100,000 must register for Self Assessment. The deadline is 5 October following the end of the relevant tax year. Failure to register is itself a penalty trigger.

Conclusion

The 60% effective marginal rate between £100,000 and £125,140 is one of the UK tax system’s most consequential anomalies. It charges the highest marginal rate in the entire income tax system on a group of earners who are not the UK’s wealthiest — it is higher than the 45% rate on income above £125,140. It was created not by deliberate policy design but by the interaction of two separate rules, and it has never been prominently disclosed. With 1.12 million people now in the over-£100,000 category and thresholds frozen until 2031, it is becoming a mainstream financial planning challenge rather than a niche concern.

The solution — pension contributions — is legal, well-established, and produces one of the highest effective returns on any financial decision available in the UK: 60p of tax saved for every £1 of pension contribution made in this band, plus the restoration of childcare benefits that can be worth £4,000–12,000 per child per year. The carry forward mechanism extends the capacity for large contributions. Salary sacrifice delivers the result through payroll with additional NI savings. Gift Aid provides a supplementary mechanism where pension allowance is exhausted.

The key insight is to plan before crossing the threshold, not after. A proactive pension contribution strategy that keeps adjusted net income at or below £100,000 eliminates the 60% rate entirely and restores the full Personal Allowance. The rate HMRC never advertises is also — for those who plan for it — the rate that provides the greatest pension contribution incentive in the UK tax system.

Frequently Asked Questions

What is the 60% tax rate in the UK?

The 60% tax rate is an effective marginal income tax rate that applies to earnings between £100,000 and £125,140 in the UK for the 2026–27 tax year (England, Wales, and Northern Ireland; approximately 67.5% in Scotland). It is not a formally legislated rate — it arises from the interaction of two rules: the 40% higher rate income tax that applies to earnings in this range, plus the loss of Personal Allowance (£12,570 for 2026–27), which is withdrawn at £1 for every £2 earned above £100,000. The lost Personal Allowance is effectively taxed at 40%, adding 20p per pound to the already-40% marginal rate, producing a combined effect of 60p lost for every pound earned in this band. Including National Insurance (2% in this range), the effective combined marginal rate reaches approximately 62%. The term 'hidden' rate reflects that it appears on no official HMRC rate table and is not disclosed in standard tax documents.

How many people are affected by the 60% tax trap in 2026?

HMRC estimates that approximately 1.12 million people had taxable income over £100,000 in 2025–26, up from 754,000 in 2022–23 (cited saga.co.uk, October 2025). Of those, approximately 725,000 fall specifically in the £100,000–£125,140 band where the 60% rate applies — more than double the 300,000 affected in 2017–18 (loveelectric.cars, June 2026). The number is forecast to reach 850,000 by 2028–29. 77,000 pensioners (aged over 66) were caught in 2024–25, a 126% increase since 2020 (HMRC figures released to Interactive Investor, cited saga.co.uk). The threshold is frozen until at least April 2031, ensuring more people are drawn in by normal wage growth every year.

How can I avoid the 60% tax trap?

The primary method is making pension contributions that reduce your adjusted net income (ANI) below £100,000. HMRC uses ANI — not gross salary — to determine Personal Allowance entitlement. Contributions to a pension or via salary sacrifice reduce ANI pound for pound. If ANI falls below £100,000, the Personal Allowance is fully restored and the 60% effective rate does not apply to any income. For a personal pension or SIPP: pay in 80%, HMRC adds 20% basic-rate relief automatically, and you claim the remaining 20% higher-rate relief via Self Assessment. For salary sacrifice: the reduction takes effect at payroll, produces immediate NI savings, and may trigger employer NI savings that some employers pass to your pension. Gift Aid charitable donations also reduce ANI and can supplement pension contributions when the Annual Allowance is exhausted. Timing and deferring income (bonuses, dividends) to a year where total ANI stays below £100,000 is a third option for those with control over when income is received.

What is the pension Annual Allowance for 2026–27 and how does carry forward work?

The standard pension Annual Allowance for 2026–27 is £60,000. This is the maximum total pension contribution (from all sources — employee, employer, and third party across all your pensions) that qualifies for tax relief in a single tax year. Carry forward allows you to add unused Annual Allowance from the previous three tax years, subject to: being a member of a registered pension scheme in those years, and having earned income at least equal to the total contribution in the current year. For example, if you had £15,000 unused in 2023–24, £20,000 unused in 2024–25, and £10,000 unused in 2025–26, you could carry forward £45,000 and add it to the current year's £60,000 allowance — enabling a total contribution of £105,000 gross in 2026–27. This is sufficient to bring a very high earner's ANI well below £100,000. Note: the Annual Allowance itself tapers for those with 'adjusted income' above £260,000, reducing to a minimum of £10,000. Consult a financial adviser for calculations specific to your circumstances.

What happens to childcare if I earn over £100,000?

Crossing £100,000 of adjusted net income causes you to lose eligibility for two childcare benefits in England: Tax-Free Childcare (where the government contributes £2 for every £8 you deposit, up to £2,000 per child per year) and 30 hours of funded childcare per week for children aged 9 months to 4 years (worth approximately £6,000 per child per year). These are cliff-edge entitlements — lost entirely the moment either parent's adjusted net income exceeds £100,000, regardless of the other parent's income. Making pension contributions that bring ANI back below £100,000 reinstates both benefits. For a family with two young children in England, the combined value of Tax-Free Childcare (£4,000) and 30 hours free childcare (£12,000) is approximately £16,000 per year — meaning the total financial case for pension contributions in this band extends well beyond the income tax saving alone.

Does the 60% trap affect people in Scotland differently?

Yes — Scottish taxpayers face a higher effective marginal rate in this band because Scotland has its own income tax rates. In 2026–27, the Scottish higher rate is 42% (compared with 40% in England, Wales, and Northern Ireland), and Scotland has an advanced rate (45%) beginning at £75,000 and a top rate of 48% above £125,140. The Personal Allowance taper operates identically at £100,000 regardless of jurisdiction, but because the underlying income tax rate is 42%, the Personal Allowance withdrawal creates a larger effect: each £1 earned above £100,000 loses 50p of Personal Allowance taxed at 42% = 21p extra, plus 42p on the marginal pound, giving an effective rate of approximately 63% in the basic PA taper zone — rising to approximately 67.5% in some parts of the band. The pension contribution solution works identically in Scotland — contributions reduce Scottish ANI pound for pound and restore the Personal Allowance — but the effective relief rate is correspondingly higher. Scottish taxpayers in this band should take specialist advice, as the interaction of Scottish and UK tax rules adds complexity.