Andy Egwim breaks down the UK's 60% tax trap for high earners. Once you make over £100,000, your personal tax allowance shrinks by £1 for every £2 you earn above that threshold, creating an effective marginal tax rate near 60% until the allowance disappears around £125,140.
Questions this video answers
£12,570 (speaker's stated figure).
£100,000 (speaker-stated threshold).
£1 of allowance lost for every £2 of income above £100,000.
Approximately £125,140 (speaker also mentioned rounded £125,000).
Chapters
Now, everyone gets that tax allowance, meaning that if you make any amount up to 12, 5, 70, you don't pay any tax on it, right? So the 60 tax trap happens when you find yourself you in above 100k, between 100k and 125k, you start to lose your allowance. So there's an allowance everyone gets, it's called the personal tax allowance and it's 12, 507, 70 pounds annually. Now, what happens is that once you cross 100k, for every 2 pounds above 100k, you lose 1 pound out of your 12, 570. Now, if you earn above 100k, for every 2 pounds Above 100k, you lose 1 pound out of your tax allowance. And by the time you hit125,000 pounds, or if you want to be really specific, it's125,140 pounds. Once you hit that amount, whether it's come from your salary or if you've come from rental property, or maybe you did some medical surveys, like some of us that follow our emails, you do medical surveys and you get paid and at that point, what's going to happen, you just start paying 60 on anything above that amount. So it's your marginal tax rate is just unbelievable. A lot of doctors don't know about it, you've never heard about it, just wonder why you're earning so much. But at the end of the day, there's not a lot going home.
