The tax band that doesn't officially exist

There are four rates of income tax in England, Wales and Northern Ireland. Nought, twenty, forty and forty-five. You can find them on gov.uk, laid out in a table, and none of them says sixty.

And yet there is a stretch of income, twenty-five thousand pounds wide, where every additional pound you earn is taxed at sixty per cent. Add National Insurance and it is sixty-two. Add student loan repayments and it is worse again.

It is the highest marginal rate anyone in the country pays. Higher than a footballer's. Higher than a chief executive's. It applies to people earning a hundred and ten thousand pounds and stops applying to people earning half a million.

Nobody designed it. It fell out of a policy decision made in 2009 and it has been quietly widening ever since, because the threshold has not moved in over fifteen years while wages have.

How it happens

The Personal Allowance is the first £12,570 you earn without paying tax. It is withdrawn from anyone with income above £100,000, at a rate of £1 for every £2 above the line.

Follow it through with a £1,000 pay rise.

You earn an extra £1,000. That is taxed at 40%, so £400 goes.

But you have also lost £500 of Personal Allowance. That £500 used to be tax-free. It is now taxed at 40%, so another £200 goes.

Total tax on £1,000 of extra income: £600.

You keep £400 of a £1,000 rise. Your marginal rate is 60%.

The allowance runs out completely at £125,140, and from there your marginal rate drops back to 45%. Which produces the genuinely strange position where someone on £120,000 is losing more of each additional pound than someone on £600,000.

Who it catches

More people than you would expect, and mostly not the people who think of themselves as high earners.

You do not need a six-figure salary to cross £100,000. What matters is adjusted net income, which is everything, from everywhere:

• A bonus on top of a salary in the eighties or nineties
• Rental income alongside a job
• A one-off payment, a settlement, shares vesting
• A second job, or employment plus something self-employed
• Selling a business or a property in a year you also worked normally
• A consultant's private practice income on top of NHS earnings

The last of those is worth naming, because it catches a particular group hard. Someone with substantial pension growth in a defined benefit scheme can find that growth counts towards adjusted income as well, which is a whole second problem sitting on top of this one.

The common thread is that people arrive in the band by accident, in a single unusual year, and find out afterwards.

The bit that makes it bearable

Here is the part I actually enjoy explaining, because it turns an infuriating fact into an opportunity.

A gross pension contribution reduces your adjusted net income pound for pound. Contribute enough to bring your adjusted net income down to £100,000, and the whole Personal Allowance comes back.

Look at what that does to the cost.

A £1,000 contribution costs someone in this band £400. They were only ever going to keep £400 of that money anyway.

There is nowhere else in the UK tax system offering that. For anyone in this band who was going to contribute to a pension at some point in their life, doing it in a year they are here is dramatically better value than doing it in any other year.

Salary sacrifice is usually the cleaner route where your employer offers it, because it reduces your income at source and saves National Insurance on top.

Two limits. The Annual Allowance caps what can go in, at £60,000 for most people, though carry forward may unlock unused allowance from the previous three years. And personal contributions are capped at 100% of your earnings.

Other things that work

Gift Aid donations reduce adjusted net income too, so charitable giving from this band costs you far less than its face value. A £1,000 donation can cost you £400 and be worth £1,250 to the charity.

Timing, where you have any control over it. A bonus you can defer, an invoice you can raise in April rather than March, a gain you could realise in a different tax year. Spreading income across two years can keep you under the line in both.

Moving income to a spouse. Assets held jointly, or transferred to a lower-earning partner, produce income taxed at their rate rather than yours. Transfers between spouses are free of capital gains tax and inheritance tax, which makes this simpler than it sounds. It has to be a genuine transfer of ownership, not an arrangement on paper.

The honest complications

None of this is a reason to earn less. I have met people who turned down a pay rise or refused extra work to stay under £100,000, and it is always a mistake. Even at 60% you keep forty pence of every pound. More money is still more money. The point is not to avoid the band, it is to notice you are in it.

The money is locked away. A pension contribution solves the tax problem by putting the money somewhere you cannot touch until 55, rising to 57 in 2028. If you need it before then, the relief is not much comfort. This is the real trade and it is the reason the answer is not automatic.

It depends on your rate later. Relief at 60% going in is spectacular. Coming out, 25% is tax-free and the rest is taxed as income. The case is strongest for someone who will be a basic rate taxpayer in retirement and weaker for someone who will not.

It has to happen in the right tax year. Adjusted net income is measured over the tax year, and once 5 April has passed, the options narrow to almost nothing. If your income is variable, you want to know where you are landing before the year ends, not after.

And the allowance may not be the only thing at stake. If you also have children and Child Benefit is being clawed back, or if a tapered Annual Allowance is in play, the interactions get complicated quickly and the arithmetic stops being something to do on the back of an envelope.

What to actually do

Work out your adjusted net income for this tax year. All of it, from everywhere, not just your salary.

If it is over £100,000, work out what contribution would bring it back to the line, and what that would genuinely cost you after relief. Most people doing this for the first time are surprised by how small the net figure is.

If your income is variable and you might land in the band, find out before April rather than after.

And if you are anywhere near this territory with children, a large pension, or several sources of income, get it looked at properly. The band itself is simple arithmetic. The interactions around it are not, and this is one of the few places where an hour of someone's time reliably pays for itself several times over.

This article is for general information and is not personal advice. Figures are based on 2026/27 rates for England, Wales and Northern Ireland. Tax treatment depends on individual circumstances and can change.

If you would like to talk any of this through, get in touch.