Avoid the 62% Tax Trap in the UK

If your income is £100,000–£125,140, you may fall into the 62% tax trap. This happens because your personal allowance (£12,570) starts to reduce: for every £2 you earn over £100,000, you lose £1 of your allowance. Combined with 40% income tax and 2% National Insurance, this raises your effective tax rate to 62% on additional income.

To avoid this:
• increase pension contributions
• make charitable donations

These actions reduce your adjusted net income, allowing you to retain part or all of your personal allowance and pay less tax. Contact us, and we can help you plan your income and optimize your taxes to avoid the trap.