The short version: The additional rate is the highest Income Tax band in the UK. If you earn over £125,140, you pay 45% on everything above that threshold.
How does Income Tax work?
You don’t pay one flat rate on everything. It’s split into bands. The first £12,570 is tax free (your Personal Allowance). From £12,571 to £50,270 you pay 20% (basic rate). From £50,271 to £125,140 you pay 40% (higher rate). Above £125,140 you pay 45% (additional rate).
In Scotland, the additional rate is 47%.
What’s the 60% tax trap?
Here’s where it gets sneaky. Between £100,000 and £125,140, you start losing your Personal Allowance. For every £2 you earn over £100k, you lose £1 of that tax free amount. The result? Your effective tax rate in that band is actually 60%.
There are ways to bring this down (pension contributions are popular), so if you’re in this bracket, it’s worth planning ahead.
Earning over £100k and want to keep more of it? Let’s have a chat about your options.
