A six-figure salary sounds comfortable. And in isolation, it is.
But factor in a mortgage, childcare, the cost of commuting, and the general reality of modern living… and £100,000 stretches a lot less than it looks on paper.
Then HMRC takes 60p of every extra pound you earn in this band.
This is a problem for professionals who've worked hard, reached senior roles, and are now being penalised for it at precisely the life stage when costs tend to peak.
So what can you do to avoid the 60% tax trap in the UK?
This guide explains what you can legally do, with a special emphasis on what we know best: salary sacrifice.
**This is not tax advice.** We’re not accountants or financial advisors, we just know the ins and outs of salary sacrifice and want as many people to benefit from it as possible. Those with the most to gain, typically tend to fall in the 60% tax trap.
What is the 60% tax trap?
Most people assume the UK has three income tax bands: 20%, 40%, and 45%. But there's an unofficial fourth band that catches thousands of earners every year.
If your income sits between £100,000 and £125,140, you're in it.
Here’s how it happens:
HMRC tapers your Personal Allowance (the £12,570 of income you'd normally pay zero tax on) by £1 for every £2 you earn above £100,000. By the time you hit £125,140, your Personal Allowance is gone.
You're effectively paying:
- 40% income tax on your earnings
- 2% National Insurance
- A further ~20% through the loss of your Personal Allowance
That's an effective marginal rate of around 60% on every pound earned in this range.
📍 Based in Scotland? The trap is actually worse north of the border.
Scotland has an "advanced rate" band of 45% on income between £75,001 and £125,140, meaning the effective marginal rate for Scottish taxpayers in the £100k–£125,140 band is closer to 67.5%.
The Personal Allowance taper rules are identical, but the higher underlying rate makes the impact more severe.
That’s a bummer.
So, who gets caught in the 60% tax trap?
According to HMRC estimates, almost 725,000 workers fall into the 60% tax trap in 2025-26, more than double the 300,000 caught in 2017-18.
That number is forecast to reach 850,000 by 2028-29, with frozen thresholds locked in until at least 2031 continuing to drag more people in every year.
Here are the most common ways people find themselves in the £100k–£125,140 band:
- A promotion or pay rise — especially common for senior professionals in their 40s and 50s reaching peak earning years
- A bonus or commission payment — your base salary is £88k, but a strong year pushes your total earnings over the threshold
- Dividend income — directors or shareholders taking dividends on top of a salary near the £100k mark
- Overtime or a lucrative project — a one-off spike that wouldn't normally put you in this position
- Frozen thresholds doing the work quietly — with income tax bands frozen until at least 2028/29, the numbers affected are likely to grow further as salaries naturally rise with inflation
Some people don't realise they've crossed the threshold until after that tax year. By then, the money is already gone.
Once your adjusted net income crosses £100,000, you can lose access to:
- 30 hours free childcare — worth up to £6,000 a year for families with young children
- Tax-Free Childcare — up to £2,000 per child annually
- Your full Personal Allowance — worth up to £5,028 in additional tax for a 40% taxpayer
How to avoid the 60% tax trap
The key to avoiding the 60% trap is reducing your adjusted net income, which is the figure HMRC uses to calculate how much of your Personal Allowance you're entitled to.
Salary sacrifice does exactly that.
When you sacrifice part of your salary in exchange for a benefit, that amount is taken from your gross pay before tax is calculated. It never appears as taxable income. Which means HMRC sees a lower number, and your Personal Allowance starts coming back.
It helps to understand how salary sacrifice works at the payroll level:
- Your employer deducts the sacrifice amount from your gross salary
- Your revised, lower salary is what gets taxed
- You pay income tax and National Insurance on the reduced figure
- The car is provided as a benefit, with a Benefit-in-Kind (BIK) tax charge (for EVs that's currently just 3%)
Every pound you ‘sacrifice’ in this band is effectively worth 60p more than it would be for a standard higher-rate taxpayer, because you're recovering value at the 60% marginal rate, not just 40%.
Let’s look at it this way:
An employee earning £110,000 sacrifices £600/month (£7,200/year) for an EV through their employer's scheme.
- Adjusted net income drops from £110,000 to £102,800
- Personal Allowance is partially restored — an additional £3,600 of income becomes tax-free
- That alone saves approximately £1,440 in income tax
- Add in the NI savings on the sacrifice itself, and the effective monthly cost of the car falls significantly below the gross sacrifice figure
One important note: it's your adjusted net income that determines your Personal Allowance. This includes income from dividends, rental income, and savings interest. If you have multiple income sources pushing you above £100,000, salary sacrifice on your employment income can still help bring that adjusted figure down but you’ll need to factor in all your income to understand if it will restore any of your personal allowance or childcare costs.
For a worked payslip example, see our salary sacrifice electric car example.
Why an EV makes salary sacrifice even more powerful
You can use salary sacrifice for a range of benefits, but when it comes to avoiding the 60% tax trap, the type of benefit you choose matters. And right now, nothing comes close to an electric vehicle.
Here's why.
Benefit-in-Kind tax on EVs is exceptionally low
When you receive a car through salary sacrifice, HMRC treats it as a taxable benefit — known as Benefit-in-Kind (BIK). The BIK rate is calculated as a percentage of the car's list price, and that percentage varies depending on the vehicle's emissions.
For a petrol or diesel car, BIK rates currently range from 20% to 37% of the car's value. For a fully electric vehicle, the rate is just 3% for 2025-26. HMRC has already confirmed rates through to 2030, giving you certainty for the full lease term.
For someone in the 60% trap, this matters more than for anyone else. You're recovering value at the highest possible marginal rate on the sacrifice itself, while the taxable benefit added back is almost negligible.
The numbers work harder in this band
For a standard higher-rate taxpayer, salary sacrifice on an EV already delivers significant savings, typically 30–40% off the equivalent cost of leasing privately.
For someone in the £100k–£125,140 band, those savings can reach up to 60%, because every pound sacrificed is sheltering income that would otherwise be taxed at the highest effective rate in the UK tax system.
That's the difference between a £600/month car costing you £600 or closer to £250 net, depending on your specific income and sacrifice amount.
For a full breakdown of the employee tax benefits of EV schemes, including how BIK is calculated and what it means for your take-home pay, see our dedicated guide.
New or used — both work
One thing worth knowing: salary sacrifice isn't limited to brand new EVs.
With loveelectric, you can access used EVs on salary sacrifice too. That means the savings are available at a wider range of price points. For someone whose priority is reducing adjusted net income rather than driving the latest model, a used EV can be just as effective a tool at a lower sacrifice amount.
It also means employees in lower tax brackets can benefit from the scheme too. So the people you manage—if any—can get a car through the scheme too. Now it’s a full-fledged workplace benefit scheme that attracts, retains, and rewards talent.
Everything is included
Unlike leasing a car privately, salary sacrifice packages through loveelectric include insurance, servicing, maintenance, tyres, breakdown cover and road assistance. It’s all wrapped into the single monthly sacrifice figure.
There are no surprise costs sitting outside the sacrifice, which means the tax efficiency calculation is clean and predictable.
That matters when you're using the scheme strategically to manage your income, because you need to know exactly what you're sacrificing each month, and why.
Want to see what you could drive with salary sacrifice? Explore our full range of available EVs.
Other ways to avoid the 60% tax trap
Salary sacrifice isn't the only tool available to people in this band.
Pension contributions
Paying more into your pension is the most commonly cited solution. Additional contributions reduce your adjusted net income in the same way salary sacrifice does, and for many people in this band it makes sense to do both.
The downside is that your money is locked away until retirement. You reduce your tax bill, but you don't get anything tangible today.
Gift Aid donations
Charitable donations made through Gift Aid also reduce your adjusted net income. If you're already a regular donor, this can be a useful way to nudge your income below £100,000. But it costs you money rather than redirecting it.
Timing bonuses or income
If you have some control over when income lands, through self-employment, dividends, or deferred bonuses, spreading it across tax years can help you avoid straying into the trap.
This works, but it's complex, not always possible, and offers no ongoing benefit.
Why an EV salary sacrifice is different
Every other solution asks you to spend money, lock it away, or defer income to escape the 60% trap.
Salary sacrifice on an EV does something none of them can, it reduces your adjusted net income and puts a brand new car on your driveway, with insurance, servicing and maintenance included, for a net monthly cost that's often less than people expect.
It's the only option where avoiding tax and getting something genuinely useful are the same decision.
Use our salary sacrifice calculator to see what it could mean for your specific income.
A real-world scenario for escaping the UK’s 60% tax bracket
Everything is easier to understand when applied to a real situation. Here's how the 60% trap, and salary sacrifice, plays out for a typical loveelectric customer.
The situation
Sarah is a senior marketing director based in Manchester. She earns a base salary of £110,000 and has two children aged two and four, both in full-time childcare.
Before salary sacrifice, her picture looks like this:
- Adjusted net income: £110,000
- Personal Allowance: reduced by £5,000 → down to £7,570
- 30 hours free childcare: not eligible
- Tax-Free Childcare: not eligible
- Effective marginal rate on income between £100k–£110k: ~60%
She's paying full whack on that top slice of income, and losing thousands in childcare entitlements she'd otherwise qualify for.
The salary sacrifice
Sarah's employer offers an EV salary sacrifice scheme through loveelectric. She chooses a car with a gross monthly sacrifice of £650/month — £7,800/year.
Here's what changes:
- Adjusted net income drops from £110,000 to £102,200
- Personal Allowance is partially restored — an extra £3,900 becomes tax-free, saving approximately £1,560 in income tax
- NI savings on the sacrifice itself: approximately £156/month
- BIK tax on the EV at 3%: minimal — approximately £27/month
Net effective cost of the car: approximately £270–£300/month
That's a saving of over 55% compared to leasing the same car privately and without any of the additional costs for insurance, servicing or maintenance, which are all included.
The childcare unlock
Sarah's adjusted net income at £102,200 is still above £100,000, so she hasn't yet reclaimed her childcare entitlements. But if she were to combine her EV sacrifice with a modest additional pension contribution of £2,500/year, or choose a slightly higher-spec car, her adjusted net income drops below £100,000 entirely.
At that point:
- 30 hours free childcare is restored across both children — worth approximately £10,000/year
- Tax-Free Childcare eligibility returns — worth up to £4,000/year
- Full Personal Allowance of £12,570 is restored — saving a further £1,428 in income tax
The combined value of those unlocked benefits alone dwarfs the gross cost of the car.
Keep in mind: These figures are illustrative and will vary based on individual income, car choice, lease term, and personal circumstances. To see what the numbers look like for your situation, use our salary sacrifice calculator or browse our available EVs to find a sacrifice amount that works for you.
For another example of how salary sacrifice affects take-home pay at different income levels, see our salary sacrifice electric car example.
Is salary sacrifice always the right move to reduce your tax burden?
Here's an honest look at when salary sacrifice works best, and when to think carefully first.
It's most powerful in the £100k–£125,140 band
This is where the maths is most compelling. You're recovering value at the highest effective marginal rate in the UK tax system, and every pound of adjusted net income you bring back below £100,000 unlocks additional benefits on top of the direct tax saving.
If your income sits comfortably above £125,140, the Personal Allowance is already fully withdrawn, so you won't reclaim it through sacrifice. You'll still make significant tax and NI savings on the sacrifice itself, and the EV BIK rate remains exceptionally low, but the childcare and allowance unlocks discussed above won't apply in the same way.
The mortgage consideration
Salary sacrifice reduces your gross salary which happens to be the figure most mortgage lenders use to assess affordability.
If you're planning to remortgage, apply for a new mortgage, or significantly increase your borrowing in the near future, it's worth understanding how your lender treats sacrificed income before committing to a scheme.
Some lenders will factor the sacrifice back in when assessing affordability. Others won't.
It's worth checking with your broker or lender first. For a fuller overview, see our guide on how salary sacrifice affects mortgage applications.
It reduces take-home pay by design
Salary sacrifice savings are real, but they come in the form of a car and reduced tax, not cash. For most people in this band that trade-off is worth it, but it's important to go in with eyes open, particularly if cash flow is tight.
Early exit considerations
Salary sacrifice agreements are typically tied to a fixed lease term, usually 24, 36 or 48 months.
Leaving your job or ending the agreement early can trigger early termination costs.
loveelectric provides a Zero Risk Guarantee for employers, which significantly reduces this risk, but it's worth understanding the terms of your specific scheme before signing.
Check out our article: What Happens to My Salary Sacrifice Car If I Leave My Job? to better understand how it all works.
When in doubt, get advice
Tax situations at this income level can be complex, especially if you have multiple income sources, are self-employed alongside employment, or have other reliefs in play.
The scenarios in this article are illustrative. For advice tailored to your specific circumstances, it's worth speaking to an independent financial adviser or accountant.
They’ll be able to help you decide if salary sacrifice is worth it.
How to get started with loveelectric
If your employer already offers a loveelectric salary sacrifice scheme, getting started is straightforward.
You can browse our full range of EVs, including used EVs, choose a car that works for your sacrifice amount, and your employer sets it up through payroll.
For a full walkthrough, see our guide on how to get a car on salary sacrifice.
If your employer isn't signed up yet, you can change that!
Many of loveelectric's customers are senior employees who brought the scheme in for themselves and ended up making it available to their whole team.
It's completely cost-neutral for businesses to join. Just let a decision-maker know that you’re interested and how it benefits the company as well as employees.
If you are a decision-maker looking to bring the scheme to your organisation, book a demo and we'll walk you through everything.
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