The 60% tax trap

Why 60, when the table says 40

The personal allowance — £12,570 of income taxed at nothing — is withdrawn by £1 for every £2 of adjusted net income above £100,000. So an extra pound costs 40p in tax directly, and drags 50p of previously untaxed allowance into the 40% band, costing another 20p. Sixty pence in the pound, on roughly £25,000 of income.

By £125,140 the whole allowance has gone, which is worth £5,028 in extra tax. Past that point the rate drops to 45% — so the most expensive income anyone earns in this country is not the income of the very highest earners. It is this band.

The part that runs backwards

Relief comes back at the rate the trap takes. A pension contribution reduces adjusted net income, which is the figure the taper is measured against — so inside this band every pound paid in is relieved at about 60p. Clearing the trap entirely from £125,140 means paying £25,140 into a pension for a cost to take-home pay of £10,056.

That is an arithmetic identity, not a recommendation. Whether tying money up until retirement is the right thing for you is a question about your life, not your tax code, and it needs someone regulated to answer it.

Where this stops

Income tax only. National Insurance adds about 2% for an employee in this band, and a student loan adds 9% more — but both need to know how you are paid, and Scotland sets its own rates entirely. We would rather leave them out than get them half right.

£100,000 is also the line where both childcare schemes are withdrawn in full, which for a household with two children in nursery can be worth more than the tax. That is the same threshold seen from the other side.