What is the trap zone in 2025/26?

The trap zone is ANI between £100,000 and £125,140. Below £100,000 you have the full Personal Allowance. Above £125,140 the allowance is fully withdrawn and you pay 45% additional rate with no allowance. The trap only occurs in this £25,140 band.

Does employer pension contribution count?

Yes. If your employer makes contributions, these count toward your annual allowance. However, employer contributions do not directly reduce your ANI — only personal contributions and salary sacrifice reduce your taxable income.

Can I make a lump sum pension contribution to escape the trap?

Yes. You can make a one-off lump sum personal pension contribution at any time during the tax year. Relief-at-source SIPPs are the most common method. You claim the basic rate automatically; higher rate relief is claimed via Self Assessment.

Is the 60% rate really worse than the additional rate?

Yes. The additional rate of 45% (which applies above £125,140) is lower than the 60% effective rate in the trap zone. This means earning more income in the £100,000 to £125,140 band is particularly inefficient, and the trap is worth taking active steps to avoid.

Does the trap apply to dividend income?

Yes, dividend income counts toward ANI and can push you into the trap zone. However, the marginal rate calculation is slightly different for dividends since they are taxed at lower rates. Employment and self-employment income create the most severe trap effect.

What about National Insurance in the trap zone?

National Insurance is not directly affected by the Personal Allowance withdrawal, so it does not contribute to the 60% effective rate. However, if you are employed, you will already be paying 2% NI on earnings above the upper earnings limit of £50,270, which is additional to the income tax burden.

What if I cannot afford enough pension contributions to escape?

Even partial pension contributions are still valuable at 60% effective relief. If you can only contribute enough to reduce ANI from £115,000 to £110,000, you still save £3,000 in tax on that £5,000 contribution (60% × £5,000). You do not have to exit the trap fully to benefit.

Are there other ways to reduce ANI besides pension contributions?

Yes — legitimate options include salary sacrifice arrangements (which reduce contractual gross salary), Gift Aid donations, trading loss relief, and qualifying enterprise investment scheme (EIS) income tax relief. Each reduces ANI and can help avoid or reduce exposure to the trap.

Does the trap affect my spouse or civil partner?

The trap affects each individual independently based on their own ANI. However, if your spouse has lower income, transferring income-producing assets or using their unused pension allowances can reduce household tax. Marriage Allowance is not available when one spouse is a higher rate taxpayer.

Do I need to file Self Assessment to reclaim the 60% relief?

If your employer deducts PAYE and you make personal pension contributions outside of salary sacrifice, you will need to file a Self Assessment return to claim the higher rate element of pension relief. Relief-at-source schemes give basic rate relief automatically, but the remaining 20% (or 40% in the trap) must be claimed via SA.

What happens to employees with bonuses that push them into the trap?

Employees who receive bonuses that push total income above £100,000 may be able to ask their employer to contribute the bonus directly to their pension via employer contribution, avoiding the trap entirely. Alternatively, salary sacrifice arrangements can be set up proactively before the bonus is paid.

Where can I get advice on the tax trap?

HMRC guidance is available on gov.uk. For complex situations involving carry forward, tapered annual allowance, or self-employment income alongside employment, a chartered tax adviser (CTA) or chartered accountant can provide tailored advice.

Is the trap mentioned in HMRC official publications?

HMRC does not use the term '60% tax trap' officially, but the Personal Allowance abatement rules are documented in their Income Tax manual. The effect is an arithmetic consequence of the abatement rule in sections 34A and 35 of the Income Tax Act 2007.

Will the trap be abolished?

The March 2023 Budget raised the ANI at which the trap ends from £100,000 to £125,140 (in line with the additional rate threshold). There has been no announcement to remove the trap mechanism, and both main parties have left the threshold frozen, meaning more people are affected due to wage growth.

How does the trap interact with child maintenance?

Pension contributions that reduce ANI do not automatically reduce child maintenance assessments, as those use a different income definition. Seek specific legal advice if you have both a tax trap and a child maintenance situation to manage.

Does the trap apply to Scottish taxpayers?

Scottish taxpayers pay Scottish income tax rates which differ from the rest of the UK, but the Personal Allowance abatement mechanism operates on the same UK-wide ANI basis. The effective marginal rate in the trap is slightly different for Scottish taxpayers due to different rate bands, but the concept still applies.

Is the 60% rate the highest effective marginal rate in the UK tax system?

For most people, 60% is the highest effective marginal rate through income tax alone. However, when National Insurance and student loan repayments are factored in at lower income levels, effective marginal rates can also be very high. The 60% figure is specific to the Personal Allowance withdrawal zone for income and NI purposes only.

How does the tapered annual allowance interact with the trap?

The tapered annual allowance reduces pension input limits for people with 'adjusted income' above £260,000. If you are in the trap zone at £100,000–£125,140, you are well below the taper threshold and have the full £60,000 annual allowance, so tapered annual allowance is not a concern at these income levels.

60% Tax Trap Calculator 2025/26 | £100,000 Income Tax Trap

Q: What is the 60% tax trap?

The 60% tax trap occurs between £100,000 and £125,140 of Adjusted Net Income. In this range, every £2 of additional income loses £1 of Personal Allowance. Combined with the 40% income tax rate, this creates an effective 60% marginal tax rate on income in this band.

Warning: The 60% Tax Trap

For every £2 earned between £100,000 and £125,140 (ANI), you lose £1 of Personal Allowance. Combined with the 40% higher rate of tax, this creates an effective marginal tax rate of 60% — higher even than the 45% additional rate.

How the 60% Rate Arises

The UK Personal Allowance is £12,570 for 2025/26. Once your Adjusted Net Income (ANI) exceeds £100,000, HMRC reduces your allowance by £1 for every £2 of ANI over that threshold. The full allowance disappears at ANI of £125,140.

On each £1 earned in this band, you pay 40p income tax directly. But the £0.50 reduction in Personal Allowance converts previously tax-free income into taxable income at 40% — adding another 20p. The total effective marginal rate is 60p per £1, or 60%.

The Pension Solution

Making gross pension contributions reduces your ANI pound-for-pound. In the trap zone, each £1 of gross pension contribution delivers an effective 60% tax saving. This means the net cost of a pension contribution in the trap is just 40p per £1 — one of the most efficient forms of pension saving available anywhere in the UK tax system.

For a relief-at-source SIPP, you physically pay 80p per £1 gross (the provider claims 20p basic rate relief). You then reclaim an additional 40p per £1 via Self Assessment (the 20% higher rate element, plus the extra 20% from restoring the Personal Allowance). Your total cash out is 80p; your cash back is 40p; net cost 40p.

Carry Forward of Unused Annual Allowance

If you have not used your full pension annual allowance in the previous three tax years, you can carry forward unused allowance. This means you may be able to contribute well above the current year £60,000 limit if needed to fully exit the trap — particularly useful if you received a large bonus that pushed you into the trap unexpectedly.

Frequently Asked Questions

What is the 60% tax trap? +

The 60% tax trap occurs between £100,000 and £125,140 of ANI. In this range, every £2 of additional income loses £1 of Personal Allowance, creating an effective 60% marginal tax rate combined with the 40% higher rate of income tax.

How is the 60% effective rate calculated? +

For every £1 earned in the trap zone, you pay 40p income tax. The PA reduction means you also lose 50p of allowance per £1 earned, and that 50p is now taxed at 40% — adding another 20p. Total: 60p tax per £1 earned.

How can I escape the 60% tax trap? +

The most effective strategy is to make pension contributions to bring ANI below £100,000. Gift Aid donations have the same effect. Each £1 gross pension contribution or Gift Aid donation reduces ANI by £1, effectively providing 60p tax relief per £1 contributed.

What is the pension annual allowance for 2025/26? +

The annual allowance is £60,000 for 2025/26, or 100% of your UK earnings if lower. You can also carry forward unused allowances from the previous three tax years. At incomes in the trap zone (£100k–£125k), the tapered annual allowance does not apply.

Is the 60% rate worse than the additional rate? +

Yes. The 45% additional rate (above £125,140) is lower than the 60% effective rate in the trap zone. Earning income in the trap is particularly inefficient — more so than earning it above £125,140.

Can I use salary sacrifice to avoid the trap? +

Yes. Salary sacrifice reduces your contractual gross salary and ANI directly, without needing to claim relief via Self Assessment. This is often the simplest route for employees. Speak to your employer's payroll team before the bonus or pay date.

Does the trap affect Scottish taxpayers? +

Scottish taxpayers pay Scottish income tax rates, but the Personal Allowance abatement operates on UK-wide ANI rules. The effective marginal rate in the trap zone differs slightly for Scottish taxpayers due to different rate bands, but the trap mechanism still applies.

What is the net cost of a pension contribution in the trap zone? +

In the trap zone, the net cost of a £1 gross pension contribution is only 40p. You pay 80p to a relief-at-source SIPP (provider claims 20p basic rate relief), then reclaim 40p via Self Assessment (20% higher rate + 20% trap relief). Net cost: 40p.

Do I need to file Self Assessment to reclaim the relief? +

Yes. If you make personal pension contributions via a relief-at-source scheme, you must file Self Assessment to claim the higher rate element. Relief-at-source schemes automatically add 20% basic rate relief; the additional 20-40% in the trap must be claimed via SA.

What if a bonus pushes me into the trap? +

Employees who receive bonuses pushing total income above £100,000 may be able to ask their employer to contribute the bonus directly to a pension via employer contribution, avoiding the trap. Salary sacrifice arrangements can also be set up proactively before the bonus payment date.

How does Gift Aid interact with the 60% trap? +

Gross Gift Aid donations reduce ANI exactly like pension contributions. A £800 cash donation (£1,000 gross) reduces ANI by £1,000. In the trap zone, each £1,000 gross Gift Aid saves £600 in income tax — an outstanding rate of charitable giving efficiency.

Will the 60% trap be abolished? +

There has been no announcement to remove the trap mechanism. The threshold was adjusted in 2023 (from £100,000-£150,000 to £100,000-£125,140 to match the additional rate threshold), but the underlying Personal Allowance withdrawal rule remains in place.

60% Tax Trap Calculator 2025/26

Calculate Your 60% Trap Exposure

Warning: The 60% Tax Trap

How the 60% Rate Arises

The Pension Solution

Carry Forward of Unused Annual Allowance

Frequently Asked Questions