Most people assume the highest rate of income tax in the UK is 45%. On paper, that's true. The additional rate sits at the top of the table and nothing above it looks worse.

But there's a stretch of income where the effective rate quietly climbs to around 60%, and it never appears on any tax table at all. It sits between £100,000 and £125,140, and if your income lands there, every extra pound you earn is taxed far harder than the person earning £200,000.

This is the 60% trap. It catches a lot of people who don't think of themselves as especially high earners, and most of them never notice it. Here's exactly how it works, and the lever that can reverse it.

What actually happens between £100,000 and £125,140

Everyone starts with a Personal Allowance: the slice of income you can earn tax-free. For the 2026/27 tax year, that's £12,570.

Once your income passes £100,000, HMRC begins taking that allowance away. The rule is simple and unforgiving: for every £2 you earn above £100,000, you lose £1 of your Personal Allowance.

Do the arithmetic and the allowance runs out completely at £125,140. By that point you have no tax-free band at all. Everyone below £100,000 keeps their full £12,570. You get nothing.

Why it works out to roughly 60p in the pound

The pain isn't just losing the allowance. It's what losing it does to your marginal rate. Think about a single extra £2 earned inside this band:

• The £2 itself is taxed at the 40% higher rate, so 80p goes in tax.
• Earning it also strips away £1 of Personal Allowance. That £1 was previously tax-free and is now taxed at 40%, costing another 40p.

So £2 of income triggers £1.20 of tax. That's an effective marginal rate of 60% on everything you earn between £100,000 and £125,140. Above £125,140 the allowance is already gone, the taper stops, and the rate drops back to the 45% additional rate. The trap is a band, not a cliff, and it's one of the few places in the system where earning more can feel like it's barely worth it.

One note on nations: the Personal Allowance and its taper are set UK-wide, so the withdrawal between £100,000 and £125,140 applies wherever you live. Income tax rates differ in Scotland, though, so the exact effective rate inside this band is different there, and in fact higher, because Scotland's own higher and advanced rates apply. The principle is the same across the UK; the precise number depends on where you're taxed.

The lever most people miss: adjusted net income

Here's the part that changes everything. The taper isn't based on your salary. It's based on your adjusted net income, which is a specific HMRC measure, and crucially, it's a figure you can influence.

Two of the most common ways to reduce adjusted net income are:

• Personal pension contributions, into a SIPP (Self-Invested Personal Pension) or a workplace scheme, made in a way that reduces your adjusted net income.
• Gift Aid donations to charity, which are grossed up and also reduce the figure.

The effect is powerful because it stacks. A pension contribution pulls your adjusted net income back down, which reclaims some or all of the Personal Allowance you were losing. At the same time, as a higher-rate taxpayer you get 40% tax relief on the contribution itself. You reduce the tax on the money going in, and you rescue the tax-free band on the money you keep.

This is guidance on how the mechanics work, not a recommendation to contribute any particular amount. The right figure, if any, depends entirely on your wider position: your other income, how much pension Annual Allowance you have left, your goals, and when you actually want the money. That's a modelling question, and it's exactly the sort of thing our Personal Allowance Taper Avoider strategy is built to work through on your own numbers.

A worked example

Consider Priya, 54, working in Manchester. This is a deliberately simplified, illustrative scenario, not a real person, and the numbers rest on the assumptions stated below.

Priya's income for 2026/27 is £120,000. Because that's £20,000 over the threshold, she loses half of it, £10,000, from her Personal Allowance. She's left with just £2,570 tax-free, and the top £20,000 of her income has been taxed at that punishing effective 60%.

Now suppose she makes a £20,000 gross pension contribution. Her adjusted net income falls from £120,000 to £100,000, the full £12,570 Personal Allowance is restored, and she gets higher-rate relief on the contribution too.

Follow the money on that final row. The £20,000 in Priya's pension is funded by £16,000 of her own money, because basic-rate relief tops it up at source. She reclaims a further 20% higher-rate relief, about £4,000, through Self Assessment. And restoring £10,000 of Personal Allowance saves another £4,000 in tax. Net it all off and £20,000 lands in her pension for a real cost of roughly £8,000.

That's the mechanics of the 60% band working in reverse. The same rate that punished the income on the way up rewards the contribution on the way down. The figures here are modelled on the stated assumptions and are there to show how the levers interact, not to promise a specific result for anyone else.

Why this is a modelling problem, not a rule of thumb

The trap is easy to describe and surprisingly hard to plan around, because it never sits in isolation. Contributing to reclaim your allowance interacts with your remaining Annual Allowance, with whether you'll want that money before pension age, with any bonus that pushes you over the line late in the tax year, and with the tax you'll eventually pay when you draw the pension down. Solve one piece in a spreadsheet and you can easily create a problem somewhere else.

That's the case for seeing your whole picture at once. Optiml's Personal Allowance Taper Avoider models this decision inside your full retirement plan, so you can see the effect on your take-home pay today and on your lifetime tax bill, rather than optimising one tax year in a vacuum. You change the contribution, and the impact updates in seconds. No black box, just your own numbers.

Optiml is built by the team behind our established Canadian retirement-planning platform, and it's coming to the UK. Investments can fall as well as rise, and tax rules change, so the value of any plan depends on the assumptions behind it. The point isn't to chase a single clever move. It's to see the whole board before you make it.

The 60% band isn't a penalty for earning well. It's a design quirk of the system, and quirks can be planned for.

It's not about earning less. It's about keeping what the tables don't show you.