By 2029, hundreds of thousands more taxpayers will fall into a pound-100,000 "tax trap"

More workers are being forced to pay income tax at an effective 60% rate due to frozen thresholds

We examine the reasons behind this as well as how to stay out of the trap.

According to new data, hundreds of thousands of British citizens will be caught in an effective 60 percent tax trap over the course of the next four years.

According to Freedom of Information (FOI) data that wealth and asset management firm Rathbones obtained from the HMRC, nearly 2.3 million taxpayers will earn more than £100,000 by 2028/29, leaving them vulnerable to the tax trap.

In England, Wales, and Northern Ireland, the highest income tax rate is forty-five percent. However, once you make more than £100,000, the tax-free personal allowance gradually decreases. If you make £125,140 or more, you lose it entirely.

This implies that you pay a 60% income tax rate if your income falls between £100,000 and £125,140.

According to HMRC, 1.8 million taxpayers made more than £100,000 in 20242025; however, by 2028 - 2029, this number is predicted to increase by 493,000 to £2.29 million.

In addition to imposing an effective 60% tax rate on income between 100,000 and 125,140, exceeding 100,000 in earnings can prevent families from receiving essential childcare support valued at tens of thousands of pounds.

According to Rathbones financial planning lead Stephanie Ebner, the 100k tax trap has evolved into a "stealth tax on the middle class" in recent years.

She continued, "One of the most perplexing peculiarities in our tax system is the 100,000 tax trap."

After 15 years of inflation and frozen thresholds, the program, which was initially intended to target the highest earners, now ensnares thousands of professionals who were never intended to be caught. A "

Rathbones cautions that parents with two children under five may lose childcare assistance worth nearly £20,000 if they make just one over £100,000.

When parents make more than £100,000 annually, they are no longer eligible for tax-free childcare or free childcare hours.

Stephanie stated: "It's understandable that many people are worried because these expenses must be paid for with post-tax income.

"Just to counteract the effects of this tax trap, hardworking families would require a significant pay increase. The "

Source: November 2025 Freedom of Information request from HMRC. Estimates are provided for the tax years 2023 - 2024 through 2028 - 2029.

The 100k tax trap: what is it?

Taxpayers who make between £100,000 and £125,140 pay an effective income tax rate of 60% in the "100k tax trap," also referred to as the "60 percent tax trap."

This is due to the fact that your personal allowance, which is worth £12,570, is gradually reduced until it is completely gone. In addition to the 40 percent marginal rate, this entails paying additional tax.

For every two dollars earned over £100,000, the allowance is reduced by one.

For instance, if your income increased from £100,000 to £110,000, you would have to pay 40% income tax on the extra £10,000. The tax on this comes to 4,000.

Additionally, you would forfeit £5,000 of your personal allowance (50% of £10,000), which is subject to 40% tax. That comes to £2,000 in taxes.

This means that for every £10,000 earned over £100,000, you pay 6,000 (60%) in tax.

If you make more than £125,140, you have to pay an additional 45% income tax.

More taxpayers are drawn into the 60 percent tax trap by fiscal drag.

Since its introduction in April 2010, the 100,000 threshold for losing the personal allowance has remained unchanged. Additionally, since April 2021, income tax thresholds have remained unchanged and will stay that way until April 2028.

However, as taxpayers' incomes rise as a result of inflation and rising wages, an increasing number of people are being forced into higher tax thresholdsa phenomenon known as fiscal drag.

According to HMRC estimates, between 2021/22 and 2028/29, the number of people losing some or all of their personal allowance due to fiscal drag is expected to increase by 88%, from 1.22 million to 2.29 million.

Are you able to escape the 60% tax trap?

In short, the answer is yes. If you're still employed, you could contribute a portion of your pay to a workplace pension, which would lower your yearly salary.

Hargreaves Lansdown's head of personal finance, Sarah Coles, stated: "See if your employer offers a salary sacrifice program, in which you forfeit a portion of your pay and use it for tax-free items like pensions. This can be used to lower your pay below the £100,000 mark.

"You can still contribute to a self-invested personal pension (SIPP) and receive tax relief at your highest marginal rate even if your employer does not offer a salary sacrifice plan or if changes in the budget make it more difficult to take advantage of it. The "

Coles emphasized that a person on 101,000 would receive 400 tax relief and an additional 200 boost if they contributed £1,000 to a pension because their personal allowance wouldn't begin to taper down, so a £1,000 contribution would only really cost them £400.

Additionally, a parent may maintain their eligibility for tax-free childcare if they are able to bring their income back under £100,000, she continued.

"You can use a cash ISA to maximize your tax protection if you receive income from savings interest. A "

However, there have been rumors that in the Autumn Budget, Chancellor Rachel Reeves may impose a 2,000 cap on the amount of earnings that can be exchanged through salary sacrifice, which would be bad news for those attempting to avoid the 100k tax trap.

Check Out More Rachel Reeves.