The 60% Marginal Rate Trap

The UK tax system is notorious for its convoluted marginal rates. The most famous is the "60% trap" affecting earnings between £100,000 and £125,140.

Because the £12,570 tax-free Personal Allowance is withdrawn at a rate of £1 for every £2 earned over £100,000, individuals in this band face a 40% income tax rate plus an effective 20% rate from the loss of the allowance, totaling 60% (plus 2% National Insurance).