Published: June 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 HMRC tax year. All calculations and tax rules have been audited against official UK legislation.
In the UK tax system, earning more money does not always scale linearly with your take-home pay. Due to frozen tax thresholds and the tapering of allowances, there are several “tax traps” where a pay rise can trigger disproportionately high marginal tax rates. For some earners, receiving a salary increase can result in a marginal tax rate of 60% or even over 100% once lost state benefits are factored in. Navigating these critical thresholds—specifically at £50,000, £60,000, and £100,000—is vital to ensure that a promotion or pay rise is financially rewarding.
The £60,000 to £80,000 Child Benefit Trap
For parents receiving Child Benefit, the High Income Child Benefit Charge (HICBC) is a major hurdle. If either partner’s adjusted net income exceeds £60,000, the tax charge begins to claw back the benefit at a rate of 1% for every £200 of income above £60,000. Once income reaches £80,000, the benefit is fully clawed back. If you have multiple children, this clawback functions as an additional tax. For a parent with three children, a pay rise that takes them from £60,000 to £80,000 triggers a marginal deduction rate of approximately 55% to 60%, combining higher rate tax, National Insurance, and the lost Child Benefit.
The Notorious 60% Tax Trap (£100,000)
The most famous tax trap in the UK occurs when your adjusted net income exceeds £100,000. For every £2 you earn above £100,000, you lose £1 of your personal allowance (which is £12,570). This creates a band of income between £100,000 and £125,140 where you are effectively taxed twice on the same money: once at the 40% higher rate, and once because you are losing your tax-free allowance (adding another 20% effective tax). When you add Class 1 National Insurance at 2%, the marginal rate in this band is a staggering 62%. A £10,000 pay rise in this zone nets you only £3,800 in cash, while the remaining £6,200 is swallowed by tax.
Visualizing the Marginal Rate Spike
Here is how your marginal tax rate behaves as your gross salary crosses these key thresholds, assuming standard England/NI rates and no student loans:
| Gross Salary Band | Key Tax & Allowance Changes | Effective Marginal Deduction Rate |
|---|---|---|
| £12,570 – £50,270 | Basic Rate tax + National Insurance | 28% |
| £50,271 – £60,000 | Higher Rate tax begins | 42% |
| £60,000 – £80,000 | Higher Rate tax + Child Benefit Clawback (HICBC) | ~50% – 60% (depends on number of children) |
| £80,000 – £100,000 | Higher Rate tax (Child Benefit fully clawed back) | 42% |
| £100,000 – £125,140 | Higher Rate tax + Personal Allowance Taper | 62% |
| Over £125,140 | Additional Rate tax (45%) + National Insurance (2%) | 47% |
To audit your position and simulate how different salary increases affect your tax liability, use our Income Tax Calculator.
Frequently Asked Questions: Pay Rise Tax Traps
1. What is the 60% tax trap in the UK?
The 60% tax trap is a marginal tax rate of 62% (40% tax + 20% lost allowance + 2% NI) that applies to income between £100,000 and £125,140. It is caused by the phasing out of the personal allowance at a rate of £1 for every £2 of income in this range.
2. How does a pay rise affect my Child Benefit?
A pay rise that pushes your adjusted net income above £60,000 triggers the High Income Child Benefit Charge, clawing back the benefit gradually until it is fully lost at £80,000. If either partner earns over £80,000, the benefit is entirely tax-deducted.
3. What is adjusted net income, and why does it matter?
Adjusted net income is your total taxable income minus pension contributions (made via net pay or relief at source) and gift aid donations. It is the figure HMRC uses to calculate the £100k personal allowance taper and Child Benefit clawback thresholds.
4. How can I avoid the 60% tax trap when getting a pay rise?
You can avoid the 60% tax trap by contributing the portion of your salary above £100,000 into a registered pension scheme, bringing your adjusted net income back to £100,000. This preserves your personal allowance and keeps your marginal tax rate at 40% on that contribution.
5. Does the 60% tax trap exist in Scotland?
Yes, Scottish taxpayers face an even higher tax trap of 67.5% between £100,000 and £125,140 because the Scottish Higher Rate is 45% (plus 20% lost allowance + 2.5% Scottish NI equivalent). This makes pension planning even more critical in Scotland.
6. What happens to my tax-free childcare when I earn over £100,000?
If your adjusted net income exceeds £100,000 by even £1, you lose eligibility for the Tax-Free Childcare scheme and 30 free hours of childcare. This cliff-edge can mean a small pay rise costs you thousands in childcare fees.
7. Can a salary increase actually reduce my total take-home pay?
While a raise alone rarely reduces cash take-home, it can reduce your overall net wealth once you factor in lost childcare benefits, child tax credits, and the cost of repaying child benefit. In extreme cases, this creates an effective tax rate of over 100%.
8. Is the Personal Allowance reinstated if my income drops back down?
Yes, the Personal Allowance taper is calculated annually, so if your income drops below £100,000 in a future tax year, your full allowance is restored. You can also claim it back via Self Assessment if your end-of-year income is lower than expected.
9. Do charity donations help reduce the impact of tax traps?
Yes, Gift Aid donations to registered charities reduce your adjusted net income, helping you stay below the £60,000 or £100,000 thresholds. This allows you to support a cause while reducing your tax liability.
10. When does the Additional Rate tax band start in 2026/27?
The Additional Rate tax band (45% in England/NI/Wales) starts at £125,140, which is the exact point where the Personal Allowance has been fully tapered to zero. Any income above this threshold is taxed at the flat additional rate plus NI.