Between £100,000 and £125,140 your effective marginal rate is 60%. Salary sacrifice escapes it entirely. How much you can save.
The Personal Allowance (£12,570 in 2026-27) is withdrawn at £1 per £2 earned above £100,000. By £125,140 it is zero. This withdrawal adds an effective 20p per pound on top of the 40p higher rate tax, creating a 60% effective marginal rate.
| Income Band | Effective Marginal Rate | Why |
|---|---|---|
| £50,271 to £100,000 | 40% | Higher rate income tax only |
| £100,001 to £125,140 | 60% | 40% tax + Personal Allowance withdrawal |
| Above £125,140 | 45% | Additional rate, PA already zero |
Salary sacrifice pension contributions reduce adjusted net income pound-for-pound. If you earn £110,000, sacrificing £10,000 brings adjusted net income to £100,000 — restoring £5,000 of Personal Allowance and saving approximately £3,500 in combined income tax and NI, while putting the full £10,000 into your pension.
| No Sacrifice | £10,000 Sacrifice | |
|---|---|---|
| Adjusted income | £110,000 | £100,000 |
| Personal Allowance | £7,570 | £12,570 |
| Income Tax | £38,432 | £34,886 |
| NI | £3,946 | £3,146 |
| Net position | £65,557 take-home | £65,843 take-home + £10,000 pension |
The £100,000 threshold also triggers loss of 30 hours of free childcare. For parents in London, this alone is worth approximately £4,500/year. Combined with the tax trap, the effective marginal rate for affected parents can exceed 100% — earning £1 more can literally cost more than £1 in total tax and lost benefits.
What is the 60% tax trap?
Between £100,000 and £125,140, the Personal Allowance is withdrawn at £1 per £2 earned. Combined with 40% higher rate, effective marginal rate is 60%. You keep only 40p per extra pound.
How do I escape the 60% tax trap?
Salary sacrifice reduces adjusted net income. Sacrifice enough to bring income below £100,000 and your full Personal Allowance is restored — saving typically £2,000 to £6,000.
Does the trap apply in Scotland?
Yes. Scottish taxpayers face an effective marginal rate of 67.5% in this band due to higher income tax rates.
Free, accurate, 2026-27 rates. Scotland and tax code supported.