Why It Happens
For every £2 you earn over £100,000, you lose £1 of your tax-free Personal Allowance.
This creates a double whammy:
- You pay 40% tax on the extra income.
- You pay an extra 20% tax on the Personal Allowance you lost.
- Total Effective Rate: 60%.
The Escape Route
The goal is to reduce your Adjusted Net Income back down to £100,000.
Real-World Example
Scenario: You earn £110,000.
The Cost: The £10,000 over £100k is taxed at effectively 60%, costing you £6,000 in tax. You only take home £4,000 of it.
The Strategy: You put that £10,000 into a pension.
The Result:
- You pay £0 tax on that £10,000.
- You keep your full Personal Allowance.
- You have £10,000 in your pension pot instead of £4,000 in your pocket.
- Effective Relief: 60%.
Check Your Numbers
Use our interactive calculator to see exactly how much tax you are losing to this trap.
Launch 60% Trap Calculator →