The 60% band: why earning between £100,000 and £125,140 costs so much tax
Above £100,000, you lose £1 of Personal Allowance for every £2 you earn. The effect is a hidden 60% rate of income tax, and a strong case for planning.
The Personal Allowance is £12,570. Once your adjusted net income passes £100,000, it shrinks by £1 for every £2 over the limit, and disappears completely at £125,140. In that band, each extra £1 of income is taxed at 40% and also removes 50p of allowance, which is then taxed at 40% too.
Income tax only. National Insurance on earnings adds 8% up to £50,270 and 2% above.
Show the data
| £12,571 to £50,270 | 20% |
|---|---|
| £50,271 to £100,000 | 40% |
| £100,000 to £125,140 | 60% |
| Over £125,140 | 45% |
Bringing income back below £100,000
The test uses adjusted net income: total taxable income, less pension contributions paid gross and grossed-up Gift Aid donations. A higher earner who pays £10,000 into a personal pension (£8,000 net, with £2,000 added by the provider) reduces adjusted net income by £10,000. For someone on £110,000, that restores the full allowance, and the contribution effectively costs about £4,000 in take-home pay.
Other ways in
- Salary sacrifice into an employer pension, which also saves National Insurance.
- Charitable giving through Gift Aid.
- For company owners, timing dividends and salary across tax years.
- For couples, which of you holds income-producing savings and investments.
Scotland sets its own income tax bands, but the Personal Allowance taper applies in the same way.
Sources
This insight is general information, not advice for your circumstances. Talk to us before acting on it.