Budget analysis | Chancellor again refuses to do anything about the 684,000 UK taxpayers caught in 60% ‘tax trap’ says Bowmore Financial Planning

The Chancellor has again failed to take action in her Budget today to address the record 684,000 UK taxpayers* caught in the 60% ‘tax trap’ says Bowmore Financial Planning. The 60% tax rate is paid on earnings between £100,000 and £125,140.

In fact, Bowmore says, the problem has been made worse after today’s Budget.

A major flaw in the current income tax system means that individuals earning between £100,000 and £125,140 pay an effective 60% income tax rate on that slice of their earnings. This is because the £12,570 tax-free personal allowance is gradually removed once earnings exceed £100,000 annually.

The Chancellor, Rachel Reeves, has just announced in her Budget that income tax thresholds will be frozen for a further three years, extended from 2028 to 2031.

This will drag thousands more people into the 60% tax trap which is widely regarded as the UK’s most punitive marginal tax rate.

John Clamp, Fellow of the Personal Finance Society and Chartered Financial Planner at Bowmore, says: “The Government seems to have completely ignored the 60% tax trap, even as a record number of taxpayers are dragged into it. Freezing thresholds until 2031 isn’t just inaction – it actively makes the problem worse.”

Clamp adds that the trap is hitting ordinary professionals who were never meant to face this level of tax: “The Government says they want to reward hard work, yet the current system does the opposite. If HMRC takes 60p of every extra pound above £100,000, the incentive to take on more responsibility or longer hours disappears.”

Bowmore warns that the continuing freeze could have wider economic implications, with many taxpayers reassessing their working hours or opting for earlier retirement to avoid the trap.

Clamp adds: “This is a tax policy that undermines productivity at exactly the moment the UK economy needs the opposite. Leaving the trap untouched may send a clear message: working harder simply isn’t worth it.”

* Figures provided to Bowmore by HMRC