A ‘60% Income Tax band’ can arises when an individual’s income exceeds £100,000 in a tax year. Once this threshold is crossed, the personal allowance is gradually withdrawn at a rate of £1 for every £2 of adjusted net income above £100,000. As a result, the £12,570 tax-free allowance is fully removed once income reaches £125,140.
Where annual income falls in the bracket between £100,000 and £125,140, the effective marginal tax rate increases to 60%, as the withdrawal of the personal allowance creates an additional layer of tax on income within this band.
Adjusted net income is used by HMRC to determine entitlement to certain reliefs and thresholds. Adjusted net income is broadly total taxable income before personal allowances, less certain reliefs such as pension contributions, Gift Aid donations, and trading losses.
This issue can create a significant planning opportunity for individuals whose income is close to or within this range to reduce their tax bill. In some cases, it may be possible to reduce taxable income below £100,000 to preserve the full personal allowance. Common planning approaches include increasing pension contributions, making charitable donations, or using available investment reliefs where appropriate.
For higher and additional rate taxpayers, charitable giving can also be used to reduce taxable income. Donations made in the current tax year may, in certain circumstances, be carried back to the previous tax year, provided the claim is made on or before the submission of the relevant self-assessment return (typically by 31 January 2027 for the 2025–26 tax year).
