How to use the 60% tax trap calculator
- 1 Enter your total taxable income for the year.
- 2 Enter any pension contributions you already make.
- 3 Read your remaining personal allowance.
- 4 See the extra contribution needed and its real cost.
Worked example
An employee earning £110,000. Their allowance falls by £5,000 to £7,570. Sacrificing £10,000 into a pension brings adjusted net income back to £100,000, saving £6,000 in income tax and £200 in NI. The £10,000 contribution only costs about £3,800 in take-home pay.
More than tax: what else you lose over £100,000
- Childcare: if either parent's adjusted net income is over £100,000, the family loses Tax-Free Childcare and the extra free childcare hours in England.
- Real marginal rate: 40% tax plus 20% from the lost allowance, plus 2% National Insurance, means 62p of every extra pound can go in deductions.
- Ways out: pension contributions, through salary sacrifice or personal contributions claimed through Self Assessment, and Gift Aid donations both reduce adjusted net income.
- Frozen limit: the £100,000 threshold has not risen since 2010, so more people are caught each year.
See exactly how much a contribution costs with the Pension Salary Sacrifice Calculator, and keep within limits using the Pension Annual Allowance Calculator.
Features
Allowance taper
Shows how much of the £12,570 allowance you have lost.
Escape route
The pension contribution that brings income back to £100,000.
Real cost
What that contribution costs after the tax and NI saved.
Effective rate
Shows the 60% rate inside the trap.
When to use it
Bonuses
Plan before a bonus pushes you over £100,000. Escape it with the Pension Salary Sacrifice Calculator.
Salary sacrifice
Work out how much to sacrifice. Stay inside limits with the Pension Annual Allowance Calculator.
Childcare
Keep tax-free childcare and free hours. See tax in each band with the Income Tax Calculator.
Charity giving
Gift Aid donations also reduce adjusted net income. Check the charge on Child Benefit with the Child Benefit Calculator.
Related Tax tasks
Frequently asked questions
What is the 60% tax trap?
Between £100,000 and £125,140 of adjusted net income, you lose £1 of personal allowance for every £2 earned. Each extra £100 costs £40 in tax plus £20 from the lost allowance, an effective rate of 60%.
Is it really 62%?
For employees, National Insurance at 2% is added, making 62%. With a student loan it can be 71%.
What is adjusted net income?
Total taxable income minus certain reliefs, such as pension contributions and the grossed-up value of Gift Aid donations.
How do pension contributions help?
They reduce adjusted net income. Salary sacrifice and net pay contributions reduce it directly, and relief-at-source contributions are grossed up and deducted.
How much does a contribution cost me?
Inside the trap each £1,000 of salary sacrifice costs about £380 in take-home pay, because you save £600 in tax and £20 in NI.
Do I also lose childcare support?
Yes. Tax-Free Childcare and the 15 or 30 hours of funded childcare in England are lost if either parent's adjusted net income is over £100,000. Getting under the limit can be worth thousands.
What happens above £125,140?
Your personal allowance is fully withdrawn and income above £125,140 is taxed at 45%.
Can Gift Aid help?
Yes. Donations under Gift Aid are grossed up and reduce your adjusted net income, so they can also restore your allowance.
Is the £100,000 threshold rising?
No. It has been frozen since 2010 and the personal allowance is frozen until 2031, so more people are being caught.
Does the trap apply in Scotland?
Yes, and the effective rate is higher, about 67.5%, because of Scottish rates.
Do I need to file a Self Assessment return?
If your income is over £150,000 or you have untaxed income you may need to, but employees with PAYE income alone usually do not. You may need one to claim higher rate pension relief.
Can I carry forward pension allowance?
Yes. If you have unused annual allowance from the last three tax years, you can make larger contributions to get out of the trap.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Built and reviewed by Hamza Farooq, founder and lead developer
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