A historic number of British workers are set to be ensnared by a punitive tax charge this spring, as wage growth and frozen thresholds combine to create a perfect financial storm.
Official forecasts indicate that a record two million people will be earning over £100,000 from April 2026, pushing them into a bracket where they face an effective tax rate of 60%. An additional 112,000 individuals are expected to join this group compared to previous years.
How the Six-Figure Tax Trap Works
The so-called 'six-figure tax trap' severely impacts earnings between £100,000 and £125,140. For every £2 earned over £100,000, the government withdraws £1 of the tax-free personal allowance.
This mechanism means workers lose their £12,570 personal allowance gradually, resulting in an effective tax rate of 60%, or up to 62 pence for every additional pound earned within this band.
The Hidden Cost for Families
The financial penalty extends far beyond income tax. Parents crossing the £100,000 threshold also face the sudden loss of their entitlement to 30 hours of free childcare.
This benefit can be worth approximately £9,000 annually, creating a devastating double blow for working families whose real-terms pay rise pushes them just over the line.
The Silent Tax Rise of Fiscal Drag
The dramatic increase in affected workers is largely driven by 'fiscal drag'. This occurs when tax thresholds are frozen while wages and inflation rise, silently pulling more people into higher tax brackets.
With thresholds frozen until at least 2028 and wage growth continuing, millions more middle-earners are expected to be impacted in the coming years. The phenomenon has turned into a significant, if stealthy, source of revenue for the Treasury.
Chancellor Rachel Reeves has faced scrutiny over the government's budgetary calculations, denying allegations that a claimed 'black hole' was used to justify these and other tax rises. The situation underscores the intense pressure on public finances and the difficult trade-offs facing policymakers.
