The 60% Tax Trap: Why Earning More Could Leave You Worse Off
Most people assume that earning more means taking home more money. Unfortunately, the 60% tax trap reminds us that the UK tax system isn't always straightforward. For higher earners approaching £100,000, a pay rise or bonus can yield a surprisingly disappointing result ... Extra income can trigger lost allowances and a 60% effective tax rate The 60% tax trap arises because the Personal Allowance, the amount most people can earn before paying Income Tax, gradually disappears once adjusted net income exceeds £100,000. For every £2 earned above that threshold, you lose £1 of the allowance. This creates an effective marginal Income Tax rate of 60% on earnings between £100,000 and £125,140 in England, Wales and Northern Ireland. Recent reports suggest that the number of people affected has risen considerably over the past few years!With tax thresholds frozen while salaries and other income rise, more people are being caught by rules they may never have needed to consider before. And that's where I think the real problem lies. We generally encourage people to work hard, develop their careers and improve their financial circumstances. Yet the tax system can make that extra effort feel rather less rewarding than expected.Consider somebody earning £100,000 who receives a £10,000 bonus. They might reasonably expect to keep a substantial share of that extra income. However, once you account for the reduction in your Personal Allowance, £6,000 could disappear in Income Tax alone, with National Insurance potentially reducing the amount further. Fortunately, there are legitimate ways | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Would you like to know more? |
If anything I've written in my blog post resonates with you and you'd like to discover more of my thoughts about the 60% tax trap, then do call me on 01908 774320 and let's see how I can help you. Don't forget to stay updated with our daily social media posts on Facebook. |
Share the blog love ... | |||||||||||||||||||||||
#UKTax #60PercentTaxTrap #HigherEarners #IncomeTax #TaxPlanning |
About Roger Eddowes ... | ||
|
More blog posts for you to enjoy ... | ||
 | Autumn Budget 2026: property and savings tax changes With the Autumn Budget now behind us, attention is turning to what the announcements will mean in practice. Among the measures worth a closer look are the property and savings tax changes, which affect landlords, savers and a... | |
 | Autumn Budget 2026: breathing space for businesses, but is it enough? The Autumn Budget 2026 has given businesses something they have been hoping for: a little breathing space. After a difficult period of rising costs, tax pressures, and economic uncertainty, the Chancellor's latest announcemen... | |
 | Get our Autumn Budget 2026 summary The economic backdrop for the Autumn Budget 2026 remains challenging. Rising inflation, energy costs and borrowing pressures continue to strain public finances. Chancellor John Healey faces difficult decisions on taxation and... | |
 | Autumn Budget 2026 predictions: Why planning ahead matters more than guessing tax changes With the Autumn Budget happening on 28th October 2026, speculation about possible tax changes is gathering pace. From business taxation to pensions and personal finances, the Budget predictions are giving people plenty to thi... | |
 | Inheritance Tax on pensions: What the 2027 rules mean for your family The rules surrounding Inheritance Tax on pensions are changing in 2027, and anyone hoping to leave their pension savings to loved ones should be aware of what lies ahead ...... | |
 | Budget tax changes: What could they mean for businesses and investors? As the next budget approaches, speculation about tax changes is gaining momentum. The Chancellor faces a difficult balancing act: managing public finances, encouraging economic growth, and avoiding further pressure on busines... | |
 | Working lunch tax rules: When do sandwiches become a tax problem? There is something wonderfully British about gathering colleagues around a table, ordering a few sandwiches and calling it a productive meeting. After all, everyone needs lunch, and discussing business while eating seems perf... | |
 | State Pension Triple Lock changes: What could they mean for your finances The recently announced State Pension Triple Lock changes mark a significant shift in how the State Pension could increase in the future. The existing triple lock will remain in place until April 2030, but after that the earni... | |
Other bloggers you may like ... | ||
 | What does Social Impact actually mean for YourPING? Posted by Steffi Lewis on https://www.yourping.uk Social impact. It's a phrase we hear everywhere these days. Businesses talk about it, organisations promote it, and it's become something of a fashion ... | |
 | How Emotional Intelligence helps you make better choices Posted by Dave Cordle on https://blog.davecordle.co.uk Every day, we make hundreds of choices, often without much thought. Some are straightforward, while others involve difficult conversations, unexpected ... | |
 | How YourPING Group Mode check-ins work Posted by Steffi Lewis on https://www.yourping.uk For many charities, community groups and social enterprises, keeping in touch with those they support is an important part of everyday life. But manag ... | |
 | What I look for during a property viewing that the photos don't show me Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk Property photographs can make almost any home look wonderful. Clever angles, bright lighting and a little creative furniture placement can make rooms ... | |