Unexpectedly earning over £100,000 in the UK triggers a significant tax implication known as the "60% tax trap," where the personal allowance (£12,570) is reduced by £1 for every £2 earned over £100,000. This creates an effective 60% marginal tax rate on income between £100,000 and £125,140.
If you earn more than £100,000
Your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000.
Footnotes: [2] Income in excess of £100,000 is subject to both higher rate tax of 40% (£4,000) and will also result in a partial loss of the Personal Allowance, £12,570 in the 2024/25 tax year, which is tapered down by £1 for every £2 of income in excess of £100,000 (see scenario A in table below).
From April 2023, the threshold for submitting a self assessment increased to £150,000 per tax year. And from April 2024, the threshold was abolished, meaning high earners no longer need to file a tax return.
The six-figure club is larger than you might think. According to 2024 data from YouGov Profiles, nearly 18% of American adults earn more than $100,000 a year. Among those aged 35 to 44, the figure rises to 25% — one in four.
That means that your net pay will be £65,960 per year, or £5,497 per month. Your average tax rate is 34.0% and your marginal tax rate is 43.3%. This marginal tax rate means that your immediate additional income will be taxed at this rate.
Your marginal tax rate or tax bracket refers only to your highest tax rate—the last tax rate your income is subject to. For example, in 2025, a single filer with taxable income of $100,000 will pay $16,914 in tax, or an average tax rate of 16.9%. But your marginal tax rate or tax bracket is 22%.
In this article
According to last year's YouGov data, only 18% of U.S. adults earn more than $100,000 annually. And the biggest earners are mostly men—25%—and those aged 35 to 44—25%. For comparison, just 12% of women make six figures.
For an $110,000 income in the U.S., your federal income tax depends on your filing status and deductions, but generally, you'll fall into the 22% or 24% federal tax brackets for 2024/2025, plus Social Security (6.2%) and Medicare (1.45%) taxes, with total federal/state/local tax often around 25-35% or more, significantly reducing your take-home pay. For example, in Utah, a single person might pay around $17,128 in federal tax and roughly $30,878 total tax (including Social Security, Medicare, and state tax).
To avoid the 22% tax bracket (or any higher bracket), focus on reducing your taxable income through strategies like maxing out 401(k)s and HSAs, deferring bonuses, tax-loss harvesting, smart charitable giving, and strategic asset location, understanding that higher rates only apply to income within that bracket, not your entire income.
Key takeaways. Earning over £100,000 causes your personal allowance to taper, creating an effective 60% tax rate between £100,000 and £125,140. Making pension contributions is the most effective way to reduce your taxable income and reclaim your personal allowance.
This professional guidance can improve financial outcomes and provide confidence. At what point is it worth getting a financial advisor? When your financial situation becomes complex—like significant income growth, nearing retirement, or managing investments over $100,000—consider an advisor.
Where you live also plays a role. For instance, you can get by on less than $65,000 in St. Louis, Missouri, but in many California cities, you need between $100,000 and $200,000 just to live comfortably!
Unemployment compensation generally is taxable. Inheritances, gifts, cash rebates, alimony payments (for divorce decrees finalized after 2018), child support payments, most healthcare benefits, welfare payments, and money that is reimbursed from qualifying adoptions are deemed nontaxable by the IRS.
A middle-class salary varies widely but generally falls between two-thirds to double the median household income, which nationally translates roughly to $55,000 to $167,000 annually, depending on household size and, crucially, the cost of living in your specific city or state, with high-cost areas like San Jose requiring much higher earnings.