Tax planning | 25–35 minute read
The High Earner’s Guide to the 60% Tax Trap
Earn over £100,000 and there is a £25,140 slice of your income where you keep just 40p in the pound. Most people believe the top rates are 40% and 45%. Between £100,000 and £125,140 the effective rate is 60%, and a student loan takes it to 71% — 77% with a postgraduate loan on top.
The cause is the personal allowance taper. Above £100,000 your tax-free allowance is withdrawn by £1 for every £2 you earn, so an extra pound is taxed at 40% and drags previously tax-free income into tax with it. A bonus that tips you over the line can leave you barely better off.
The guide shows how to tell whether you are caught, what the band is costing you this year, and how much of it can be reclaimed — worked through in full at £108,000, £110,000, £125,000 and £160,000, with every number shown. It closes with a six-point checklist.
Thresholds are frozen until April 2031, so what you set up now will keep working for years.
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