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A Guide to the UK’s Hidden 60% Tax Rate

Technical Guides • A Guide to the UK’s Hidden 60% Tax Rate

  • Tax Planning

A Guide to the UK’s Hidden 60% Tax Rate

For individuals earning over £100,000, the UK tax system can create an effective tax rate of up to 60% within a specific income range.

This guide explains how the Personal Allowance taper works, why the 60% rate arises, and what planning considerations may help reduce its impact.

Understand the tax trap before it affects your income

Many people assume the highest UK Income Tax rate is 45%. In practice, individuals earning between £100,000 and £125,140 can face an effective tax rate of 60% due to the withdrawal of the Personal Allowance. 

This guide breaks the issue down in clear, practical terms, helping you understand where the additional tax arises and why proactive planning matters. 

What's Inside the Guide?

The guide covers: 

  • How the Personal Allowance taper works 

  • Why the effective tax rate can reach 60% 

  • A worked example using a £10,000 bonus 

  • Why the issue matters for professionals, senior employees and business owners 

  • Planning considerations, including pension contributions, Gift Aid, income timing, business expenses and investment planning 

  • Key 2026/27 Income Tax bands and takeaways 

Who This Guide Is For

This guide is relevant for individuals who are approaching, or already earning above, £100,000 a year. 

It may be particularly useful for: 

  • Professionals receiving bonuses or variable pay 

  • Senior employees considering pension contributions 

  • Business owners with flexibility over income timing 

  • Self-employed individuals managing taxable profits 

  • Anyone looking to understand how the Personal Allowance taper could affect their income 

Why This Matters?

The 60% tax trap is often overlooked because it does not appear as a separate tax band. It is created by the interaction between higher-rate tax and the gradual loss of the Personal Allowance. 

Understanding the mechanics can help you make more informed decisions about income, pensions, charitable giving, and wider financial planning. 

Access your guide 

Sign up to download your copy of A Guide to the UK’s Hidden 60% Tax Rate. 

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