The UK income tax system has a strange feature that catches well-paid professionals by surprise: a band of income where the effective tax rate jumps to around 60%, higher than the headline additional rate paid by the very richest. It is not a typo and not a hidden surcharge. It is the mathematical side effect of withdrawing the personal allowance from high earners. This guide explains the mechanism, why the rate works out near 60%, and the standard ways to step around it.
What the personal allowance is
The personal allowance is the slice of income everyone can normally earn tax free before income tax begins. For someone on a typical salary it simply sits at the bottom of their income, untaxed, and the tax bands stack on top.
The catch is that the allowance is not guaranteed for high earners. Above a high income threshold it is gradually taken away. Once it is fully gone, every pound of income is taxed, with no tax-free portion at all.
The taper rule, in one sentence
The rule that drives the whole effect is this: for every £2 of income above the high-income threshold, you lose £1 of personal allowance.
So as your income climbs through this zone, two things happen at once on each extra pound:
- The pound itself is taxed at the higher rate.
- Some of your previously tax-free allowance is converted into taxable income, so it now gets taxed too.
Stacking those together is what produces the roughly 60% effective rate.
Why the rate works out near 60%
Let us walk the arithmetic with the standard structure, using the higher rate of 40% for the band involved.
Take one extra £2 of income inside the taper zone:
- The £2 you earned is taxed at 40%, costing £0.80.
- That same £2 of extra income withdraws £1 of personal allowance. That £1 was previously tax free, but it is now taxable at 40%, costing another £0.40.
So earning £2 has cost you £1.20 in tax. £1.20 out of £2 is 60%.
Per pound, that is a 60% effective marginal rate: you keep only 40p of every additional pound earned in this zone. Above the zone, once the allowance is fully gone, the marginal rate drops back to the normal higher or additional rate, because there is no allowance left to withdraw.
This is why the trap is a band, not a permanent state. It sits between the income level where withdrawal starts and the level where the allowance hits zero. The width of that band is exactly twice the personal allowance, because it takes £2 of income to remove each £1 of allowance.
You can see the spike for any salary using our UK income tax calculator, which applies the taper automatically.
A worked example with round numbers
To keep the mechanism front and centre, suppose:
- The personal allowance is £12,000.
- Withdrawal begins at £100,000 of income.
- The higher rate is 40%.
Because £2 of income removes £1 of allowance, the full £12,000 allowance is gone after £24,000 of income above the threshold, that is, at £124,000.
So the trap zone runs from £100,000 to £124,000, a £24,000 band.
Now compare two pay rises:
- A worker going from £95,000 to £96,000 keeps the normal higher-rate outcome on that pound.
- A worker going from £110,000 to £111,000 is inside the trap. On that £1,000 rise they lose £600 to the combined effect, taking home only £400.
The second worker earns the same gross £1,000 but keeps £200 less than the first, purely because the rise lands inside the allowance-withdrawal zone.
It is “adjusted net income” that matters, not salary
A crucial detail: the threshold test is not based on your gross salary. It is based on adjusted net income, a slightly different figure that starts from your total taxable income and then subtracts certain things, most importantly pension contributions made with tax relief and Gift Aid donations grossed up.
This is the key that unlocks every escape route. You are not stuck with the income number on your contract. You can lower your adjusted net income through specific deductions and, in doing so, claw back the personal allowance you were losing.
The escape routes
Because the trap is driven by adjusted net income, anything that reduces that figure both saves tax in the normal way and restores withdrawn allowance. That double benefit is what makes the planning so powerful.
Pension contributions
The most common move is paying more into a pension. A pension contribution reduces adjusted net income pound for pound (within annual limits). If a contribution brings your adjusted net income from inside the trap back down to the threshold, every pound contributed inside that zone effectively gets relief at the 60% effective rate, because it saves you both the tax on the pound and the lost allowance. Our pension tax relief calculator shows the relief at your income level.
Salary sacrifice
Sacrificing salary in exchange for an employer pension contribution, an electric car, or other approved benefits reduces your taxable salary before it is ever counted. Inside the trap zone this can deliver an effective saving even higher than 60% once you add the National Insurance you also avoid. Our salary sacrifice calculator models the combined effect.
Gift Aid donations
Charitable donations made under Gift Aid extend your basic rate band and reduce adjusted net income, so they too can pull you back below the threshold and recover allowance.
Timing income
If a bonus or one-off payment would tip you into the zone, spreading or deferring it across tax years (where your employer allows) can keep adjusted net income lower in each year.
Who needs to watch for it
The trap matters most for:
- Employees whose salary plus bonus reaches the withdrawal zone.
- People with a base salary just below the threshold who receive a variable bonus that pushes them over.
- Anyone with extra taxable income, such as rental profit or large savings interest, stacking on top of a high salary.
If your income sits comfortably below the threshold, the taper does not affect you at all, and your personal allowance is safe. To see your overall position including the trap, National Insurance and pension, our take-home pay calculator brings it together.
Frequently asked questions
Why is the effective rate higher than the top additional rate?
Because in the trap zone you are taxed twice on each extra pound: once on the pound itself, and again because that pound strips away tax-free allowance and turns it into taxable income. Above the zone the allowance is already gone, so there is nothing left to withdraw and the marginal rate falls back to the standard top rate.
Does a bonus that crosses the threshold mean I lose money overall?
No. You never end up with less total take-home pay by earning more. You simply keep a much smaller share, around 40p per pound, of the income that falls inside the zone. The income below the zone is unaffected.
How does a pension contribution help?
Pension contributions reduce your adjusted net income, the figure used to test the threshold. Bringing that figure back below the threshold restores the withdrawn allowance, so a contribution inside the zone earns relief at roughly the 60% effective rate, an unusually generous outcome.
Is the trap based on my salary or something else?
It is based on adjusted net income, not gross salary. That figure subtracts pension contributions and grossed-up Gift Aid, among other items, which is exactly why those deductions can move you out of the trap.