The 60% tax rate impacts individuals earning between £100,000 and £125,124. Credit: 3rdtimeluckystudio/Shutterstock.

The number of UK taxpayers caught in the 60% tax rate for high earners has surged by 18% over the past 12 months, according to Bowmore Financial Planning.  

The increase brings the total to 634,000, up from 537,000 the previous year.  

This marks a 45% rise from two years ago when 436,000 taxpayers were affected. 

The 60% ‘tax trap’ impacts individuals earning between £100,000 ($127,505.48) and £125,124, who face an effective 60% income tax rate on that portion of their earnings.  

This is said to occur because the £12,570 tax-free personal allowance is gradually withdrawn once earnings surpass £100,000 annually.  

Bowmore Financial Planning attributes the increase to fiscal drag, where tax brackets fail to adjust with inflation, resulting in a higher proportion of income being taxed. 

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Bowmore Financial Planning CEO Mark Incledon said: “The number of taxpayers falling victim to this notorious tax trap was already incredibly large – recent wage inflation has pushed almost 100,000 more into this position. It’s very surprising the Government chose to not address this in the latest Budget – the effective tax rate for those earning £100k-125k is known by HM Treasury officials but they’ve chosen not to address it.” 

“Rather than trying to fix the problem the Government’s allowed it to get bigger. The long-term effect of leaving the tax trap issue unresolved is that it disincentivises hard work. People are far less likely go the extra mile and push for promotion if they think they won’t feel the reward for extra effort because the taxman is taking such a high percentage of their salary.” 

In January 2024, annual wage inflation was estimated at 5.5%.  

In addition, HM Revenue & Customs (HMRC) has reported a rise in prosecutions for tax crimes.  

By 30 September 2024, prosecutions reached a three-year high of 300, marking a 19% increase from the previous year’s 252 cases.