The UK 60% tax band
No rate table shows it, but between £100,000 and £125,140 each extra £2 of income costs £1.20 in tax. Why that happens and what can be done about it.
See it on your own figuresWhere the 60% comes from
The personal allowance is £12,570 and falls by £1 for every £2 of income above £100,000, reaching zero at £125,140.
So between those two figures, an extra £2 of income is taxed at 40% - that is 80p - and also removes £1 of allowance, which was previously untaxed and is now taxed at 40%, costing another 40p. Total: £1.20 of tax on £2 of income. An effective marginal rate of 60%.
Above £125,140 the allowance is gone and there is nothing left to withdraw, so the rate drops back to 45%. The 60% band is a spike, not a ceiling.
It is worse in Scotland
Scottish taxpayers in that range pay the advanced rate of 45% on the income and lose the allowance against the same 45%, which gives an effective 67.5%.
What people do about it
The standard responses are pension contributions and charitable giving under Gift Aid, both of which reduce adjusted net income and so restore the allowance. A £1 pension contribution in this band effectively costs 40p, because it saves 60p of tax.
That is a general observation about how the arithmetic works, not advice about what you should do. Whether it makes sense depends on your age, your other pension provision and what you need the money for, and it is worth taking proper advice before acting on it.
Why the calculator shows it
Most tax calculators report the marginal rate by reading the band table, which says 40% here. This one measures it: it computes the tax again at slightly higher income and reports the difference, so the 60% shows up as 60%.