It is the reason a pay rise above £100,000 can be taxed at an effective 60%, the harshest hidden rate in the UK system. The good news: it is also one of the most avoidable.
Most people assume the highest UK tax rate is 45%. They are wrong. Tucked between £100,000 and £125,140 of income sits a quiet 60% band that the rate tables never show. It is created by the Personal Allowance taper, and it catches tens of thousands of earners every year who never see it coming.
The mechanism is simple arithmetic with a painful result. The standard Personal Allowance of £12,570 is reduced by £1 for every £2 of adjusted net income above £100,000.
So at £110,000 of adjusted net income, you are £10,000 over the threshold. Divide by 2 and you lose £5,000 of allowance, leaving £7,570. At £125,140 you are £25,140 over, you lose £12,570, and the allowance reaches zero. Above £125,140 there is nothing left to taper, so the effective rate drops back to the normal 40% (then 45% above £125,140 in England, Wales and Northern Ireland).
The 60% figure surprises people because no official rate is set at 60%. It is the combination of two effects on the same pound.
Earn one extra pound in the taper band and you pay 40% higher-rate tax on it: 40p. But that same pound also strips away 50p of your tax-free allowance. That 50p of previously tax-free income now becomes taxable at 40%, costing another 20p. Add 40p and 20p and you have lost 60p of every extra pound.
Daniel earns a £105,000 salary in 2025/26 in England, with no pension contributions or Gift Aid. His adjusted net income is £105,000, which is £5,000 over the threshold.
He loses £5,000 ÷ 2 = £2,500 of his Personal Allowance, leaving £10,070 tax-free instead of £12,570. That extra £2,500 of income is now taxed at 40%, an additional £1,000 of tax purely from the taper, on top of the normal tax on his £5,000 of higher-rate earnings.
Now suppose Daniel pays £5,000 (net £4,000, grossed up £5,000) into a personal pension. His adjusted net income falls to £100,000, the full £12,570 allowance is restored, and the 60% band vanishes. With higher-rate relief, the £5,000 gross contribution effectively costs him around £3,000 net while the taxman funds the rest. Run your own figures through the salary and income tax calculator to see the before-and-after.
The 60% band is the most avoidable tax in Britain, because the very pension contributions that escape it also get topped up with relief.
Income tax rates on earnings are devolved to Scotland, so a Scottish taxpayer in the taper band faces an even sharper effective rate. Because Scotland's higher rate is 42% (and an advanced rate of 45% applies from £75,000), the loss of allowance stacked on those rates can push the effective marginal rate above 60%. The £100,000 to £125,140 taper itself is a UK-wide rule set by HMRC, but the underlying rate it interacts with depends on where you live.
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