Who Pays 60% Income Tax in the UK? Understanding the High Marginal Tax Rate Explained
Discover why UK earners between £100,000 and £125,140 face an effective 60% tax rate due to personal allowance tapering and how to mitigate it.
Video transcript
In the UK, an effective 60% income tax rate can occur when individuals earning between £100,000 and £125,140 lose their personal allowance (£1 for every £2 earned over £100,000), creating a high marginal tax rate. Careful tax planning or accounting advice can help mitigate this impact.
Questions and answers
Why do individuals earning between £100,000 and £125,140 in the UK face a 60% tax rate?
Because the personal allowance is reduced by £1 for every £2 earned over £100,000, creating a higher effective marginal tax rate that can reach 60%.
What is the personal allowance taper and how does it affect UK income tax?
The personal allowance taper gradually reduces the amount of tax-free income for earners above £100,000, increasing their effective tax rate until the allowance is fully withdrawn.
How can UK taxpayers reduce the impact of the 60% effective tax rate?
Careful tax planning, such as pension contributions, salary sacrifice schemes, or consulting with an accountant can help mitigate the higher tax impact.
Related questions
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If you found this explanation of the 60% UK income tax rate helpful, you might also want to explore our guides on UK tax brackets, personal allowance rules, and practical tax planning tips to minimize your tax burden effectively.
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