Avoid 60% Income Tax band

A 60% Income Tax band arises when an individual’s income exceeds £100,000 in a tax year. Once you cross this threshold, HMRC gradually withdraws your personal allowance. Specifically, they reduce it by £1 for every £2 of adjusted net income above £100,000. Consequently, the £12,570 tax-free allowance disappears entirely once income reaches £125,140.

How the 60% marginal rate arises

Where annual income falls between £100,000 and £125,140, the effective marginal tax rate jumps to 60%. Essentially, the withdrawal of the personal allowance creates an additional layer of tax within this band. Therefore, many taxpayers actively seek strategies to avoid 60% Income Tax band pitfalls.

What is adjusted net income?

HMRC uses adjusted net income to determine entitlement to certain reliefs and thresholds. Broadly, this figure represents your total taxable income before personal allowances. However, you can deduct certain reliefs to reach the final amount. These deductions typically include:

• Pension contributions made in the tax year.
• Gift Aid donations to registered charities.
• Trading losses claimed against other income.

Planning opportunities to avoid 60% Income Tax band exposure

Fortunately, this issue creates a significant planning opportunity. Firstly, individuals whose income sits close to or within this range can act strategically. In some cases, you can reduce taxable income below £100,000. As a result, you may preserve the full personal allowance.

Common planning approaches to avoid 60% Income Tax band include several practical options. For instance, you might consider the following:

• Increasing personal pension contributions before the tax year ends.
• Making charitable donations under Gift Aid.
• Using available investment reliefs where they suit your circumstances.

Charitable giving for higher and additional rate taxpayers

Higher and additional rate taxpayers can also use charitable giving to reduce taxable income. Furthermore, donations made in the current tax year offer extra flexibility. Specifically, you may carry them back to the previous tax year in certain circumstances. However, you must submit the claim on or before your self-assessment return. Typically, that deadline falls on 31 January 2027 for the 2025–26 tax year.

Speak to us today

Would you like to review your position before the tax year ends? If so, contact Ecovis Wingrave Yeats for tailored advice. Our specialists can help you plan proactively and avoid 60% Income Tax band exposure with confidence.