The £100k Tax Trap Explained: Why UK Earners Pay 60% Marginal Tax (2026/27)

In the UK tax system, earning a six-figure salary comes with an unexpected quirk known as the £100k Tax Trap. Earning between £100,000 and £125,140 exposes your income to an effective marginal tax rate of 60% (or 62% including Class 1 National Insurance).

How Does the 60% Tax Rate Happen?

Every UK taxpayer is entitled to a standard Personal Allowance of £12,570, which is 100% tax-free. However, under HMRC rules, once your adjusted net income exceeds £100,000, your Personal Allowance is reduced by £1 for every £2 you earn over £100,000.

By the time your earnings reach £125,140, your Personal Allowance is reduced to zero. For every £100 earned in this band, you pay £40 in standard Higher Rate tax plus an additional £20 because £50 of previously tax-free allowance is now taxed at 40%.