What is the UK 60% tax band for 2026 to 2027?

It is the range of adjusted net income from £100,000 to £125,140. GOV.UK states the personal allowance of £12,570 goes down by £1 for every £2 of adjusted net income above £100,000 and is zero at £125,140 or above. Each extra £100 is taxed at 40% and also exposes £50 of allowance to 40% tax, giving an effective income tax rate of about 60%.

Does a UK pension contribution reduce my US taxable income?

Not automatically. US domestic law does not treat a UK pension scheme like a US plan, so the contribution stays in US income unless a position is taken under the pension article of the US-UK income tax treaty, which has its own conditions and limits. Where a treaty position is claimed, Form 8833 disclosure must be considered. We check the treaty text for each client before excluding a contribution.

Can I deduct a Gift Aid donation on my US tax return?

Generally not. IRS Publication 526 lists foreign organisations as non-qualified recipients, apart from certain Canadian, Israeli and Mexican charities covered by treaty, and requires itemising on Schedule A. A gift to a UK-only charity reduces UK adjusted net income by the grossed-up amount but leaves US taxable income unchanged. A gift may qualify in both countries only where the recipient is recognised under both systems.

What happens to the extra UK tax I pay in the 60% band on my US return?

It becomes excess foreign tax credit. The US credit is limited to the US tax on the foreign income, so UK tax above that amount is unused in the year. The IRS states unused foreign taxes may be carried back to the previous tax year and forward to the next 10 tax years. Credits on salary and bonus are general category and cannot offset US tax on passive income.

Is there a penalty for not filing Form 8833?

Yes, where disclosure is required. The IRS states that a taxpayer who is required to report treaty benefits and does not is subject to a penalty of $1,000 for each failure. The IRS also lists situations in which Form 8833 is not required, so each treaty-based position on the return, including any pension contribution position, is checked against the disclosure rules and exceptions before filing.

Does my spouse's income affect whether I am in the 60% band?

No. The UK tests adjusted net income for each individual separately, so only your own worldwide taxable income counts towards the £100,000 limit. Your spouse's income matters on the US side, where a joint return pools income and the foreign tax credit limitation. Investment income held in your own name adds to your adjusted net income; the same income in your spouse's name does not.

US UK Tax Returns Preparation: The UK 60% Tax Band

US UK tax returns preparation changes character once a dual filer's UK adjusted net income passes £100,000, because from that point the UK personal allowance is withdrawn at £1 for every £2 of income and each extra pound is effectively taxed at about 60% until the allowance has gone. For the tax year 6 April 2026 to 5 April 2027, GOV.UK shows a standard personal allowance of £12,570 and states that the allowance is zero if income is £125,140 or above, so the band runs from £100,000 to £125,140. On the US return that same slice of income is taxed at a much lower rate, which means the UK tax paid in the band does not disappear into a neat one-for-one credit. It builds excess foreign tax credits, and the usual UK responses, a pension contribution or a Gift Aid donation, have to be tested on Form 1040 before anyone can say what they saved.

This article sets out how we prepare both returns consistently for high earners whose salary, bonus or profit share lands in the band: bankers and fund professionals paid in London, business owners drawing UK remuneration, and other US citizens or green card holders who are UK resident.

What is the UK 60% tax band and where does it start and end?

The UK 60% tax band is the range of adjusted net income over which the personal allowance is withdrawn, producing an effective marginal income tax rate of about 60% even though no 60% rate appears in the statute. The published rates page at https://www.gov.uk/income-tax-rates lists the higher rate of 40% on income from £50,271 to £125,140 and the additional rate of 45% over £125,140, on the footing of the standard £12,570 allowance. The same page states that the personal allowance goes down by £1 for every £2 that adjusted net income is above £100,000, and that the allowance is zero if income is £125,140 or above.

The arithmetic follows directly from those published figures. Take £100 of extra income inside the band. It is taxed at 40%, which is £40. It also removes £50 of personal allowance, and that £50 of previously untaxed income is now taxed at 40%, which is another £20. The total is £60 of income tax on £100 of income. Across the whole band, £25,140 of income withdraws the full £12,570 allowance, and the income tax cost is £15,084. National Insurance for employees is a separate calculation on top. The band is measured on adjusted net income, not on salary, and that distinction is where both the UK planning and the US complications begin.

What is adjusted net income and what reduces it?

Adjusted net income is total taxable income before any personal allowances and less certain tax reliefs. That is the definition HMRC gives in its guidance at https://www.gov.uk/guidance/adjusted-net-income, which also sets out the steps we follow in every UK computation for a client near the limit:

Start with net income: add up taxable income such as employment income, self-employment profits, most pensions, savings interest and dividends, then deduct reliefs such as pension payments made gross (without tax relief at source) and trading losses.
Deduct the grossed-up amount of Gift Aid donations. The guidance says to take off what was paid plus the basic rate of tax, so every £1 donated removes £1.25 from adjusted net income.
Deduct the grossed-up amount of pension contributions where the pension provider has already given basic rate relief. Again every £1 paid removes £1.25.
Add back any tax relief of up to £100 that was deducted at the first step for payments to a trade union or police organisation for superannuation, life insurance or funeral benefits.

HMRC's own example makes the point. Bill has taxable income of £115,000 and pays £10,000 of pension contributions without tax relief. His adjusted net income is £105,000, which is over the £100,000 limit, so his personal allowance is affected.

For a dual filer, the important feature is that adjusted net income is a UK concept built from UK taxable income. It includes worldwide income for a UK resident taxed on the arising basis: US brokerage dividends, US rental profit and interest on US accounts all count. We regularly see clients who believe they are safely under £100,000 on their UK payslip and are in fact inside the band once US-source investment income, reported on the same UK Self Assessment return, is added.

Why does the classic UK fix need checking on the US return?

The standard UK response to the band is to bring adjusted net income back to £100,000 with a pension contribution or a Gift Aid donation. On a UK-only view the relief looks like 60%: £25,140 contributed removes £15,084 of income tax. A US citizen or green card holder files a second return on worldwide income, and that return applies its own rules to the same two transactions. Neither of them is automatically recognised.

Start with the pension contribution. Under US domestic law a UK registered pension scheme is a foreign plan, and a contribution to it does not reduce US taxable wages simply because the UK gave relief. Any reduction on the US return comes from the US-UK income tax treaty. In general terms, the treaty's pension article contains a provision addressed to a US citizen who is resident in the UK, works there and contributes to a UK pension scheme: contributions that attract UK relief can be deductible or excludable in computing US taxable income, subject to conditions in the article and capped by reference to the relief the US would give for a comparable US arrangement. The treaty text and the Treasury technical explanation are published at https://www.irs.gov/businesses/international-businesses/united-kingdom-uk-tax-treaty-documents, and we read the position against that text for each client.

Where the US return does rely on the treaty, the position has to be considered for disclosure. The IRS describes Form 8833 at https://www.irs.gov/forms-pubs/about-form-8833 as the form taxpayers use to make the treaty-based return position disclosure required by Internal Revenue Code section 6114. The IRS page at https://www.irs.gov/individuals/international-taxpayers/claiming-tax-treaty-benefits lists positions that must be disclosed and situations where the form is not required, and states that a person who is required to report treaty benefits and does not is subject to a penalty of $1,000 for each failure. In the returns we prepare, each treaty position is logged with the article relied on, the amount, and whether a disclosure exception applies.

The alternative is to take no treaty position and leave the contribution in US taxable income. In the 60% band that may produce no additional US tax in the year, because the client usually has more UK tax than the US return can absorb. What it changes is the excess credit generated and the US records kept for the pension, so we document the choice in the year it is made.

Is a Gift Aid donation to a UK charity deductible on a US return?

Generally no. IRS Publication 526 at https://www.irs.gov/publications/p526, for use in preparing 2025 returns, lists foreign organisations among those to which contributions are not deductible, other than certain Canadian, Israeli or Mexican charitable organisations covered by those countries' treaties. It also says a contribution to a qualifying organisation is not deductible if it is earmarked to go to a foreign organisation, and that a taxpayer must generally itemise deductions on Schedule A to deduct a charitable contribution. A UK charity registered only in the UK is therefore outside the US deduction, however generous the UK relief.

A Gift Aid donation reduces adjusted net income by the grossed-up amount and can pull the donor out of the band, but US taxable income is unchanged. A donation to a US charity does the opposite: it may be deductible on Schedule A and does nothing for adjusted net income unless the recipient also qualifies for UK relief. Where a client gives to an organisation said to qualify in both countries, we obtain confirmation of the recipient's status under each system and do not assume dual qualification from a name.

What does the 60% band do to foreign tax credits in US UK tax returns preparation?

A UK resident US taxpayer normally relieves double taxation on earnings by claiming the foreign tax credit on Form 1116. The IRS explains the limit at https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-how-to-figure-the-credit as follows. The credit cannot be more than total US tax liability multiplied by a fraction, with taxable income from sources outside the United States as the numerator and total taxable income from US and foreign sources as the denominator. In plain terms, the credit can only remove the US tax on the foreign income. It cannot be refunded and it cannot reduce US tax on US-source income.

Inside the band, the UK charges about 60% on a slice of income that the US taxes at its ordinary marginal rate. The US tax on that slice is fully covered and the remainder of the UK tax is unused. The same IRS page states that unused foreign taxes may be carried back to the previous tax year and forward to the next 10 tax years, and Publication 514 at https://www.irs.gov/publications/p514 contains the detailed carryback and carryover rules. So the excess is not lost immediately. Whether it is ever used is a different question, and three limits decide it:

Category. Publication 514 requires the limit to be figured separately for each category of income, including passive category income and general category income. UK tax on salary and bonus is general category. Excess general category credit cannot be set against US tax on passive category income such as dividends, interest and most portfolio gains.
Source. The credit reduces US tax on foreign-source income only. A client with US-source dividends, US rental income or US-source compensation for US workdays has US tax that UK credits in the general category do not reach in the ordinary way.
Time. A carryforward is only useful in a later year in which general category foreign income is taxed more lightly abroad than in the US. A client who stays in the UK on similar pay keeps generating excess every year, and the oldest credits expire unused after the ten-year period.
Exclusion. Publication 514 states that you cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. A client who excludes earnings and also sits in the 60% band forfeits the credit on the excluded portion, so the choice between exclusion and credit is revisited each year.

This is why the carryforward schedule is a core working paper in the returns we prepare. We track excess credits by category and year of origin, apply the carryback where the prior year has capacity, and show the client which layers are approaching expiry.

Why does reducing UK tax not always reduce the combined bill?

The combined bill for a dual filer on any item of foreign-source earned income is, broadly, the higher of the UK tax and the US tax on it. While UK tax is above US tax, a pound of UK tax saved is a pound of combined tax saved, and the only casualty is the excess credit that would have been generated. Once UK tax on general category income falls below the US tax on the same income, the foreign tax credit no longer covers the US liability and US tax becomes payable. From that point, reducing UK tax further saves nothing: the US tax rises to fill the gap.

The pension contribution is the clearest case. If the contribution reduces UK tax by 60% of its value but is not excluded from US income, the UK tax on the client's earnings falls sharply while the US tax on them does not move. Depending on the client's overall effective rates, that can be enough to bring UK tax on the general category below US tax, and part of the apparent 60% relief is handed back on Form 1040. If the contribution is excluded on the US return under the treaty, both taxes fall together and the gap does not open. The same logic applies to Gift Aid, where there is normally no US deduction at all to keep the two sides aligned.

Worked illustration: a banker whose bonus lands in the band

The following is an illustration only, with simplified facts and assumed US figures. A US citizen resident in England has a salary of £100,000 and receives a bonus of £25,140 in the 2026 to 2027 UK tax year. She has no other income, all workdays are in the UK, and no foreign earned income exclusion is claimed. UK figures use the rates and allowance shown on GOV.UK for 2026 to 2027 and ignore National Insurance. For the US side we assume, purely to show the mechanics, that US tax before credits equals a flat 24% of her earnings. That is not a computation of her actual US liability, which depends on filing status, deductions and the US brackets for the year, and the US return would be prepared in dollars at an appropriate exchange rate. Amounts are left in sterling here so the two columns can be compared.

Salary only, no bonus. UK: £100,000 less the £12,570 allowance leaves £87,430 taxable; £37,700 at 20% is £7,540 and £49,730 at 40% is £19,892, a total of £27,432. US (assumed 24%): £24,000 before credits, fully covered by UK tax. US tax payable nil. Excess general category credit £3,432.
Salary plus bonus, no action. UK: adjusted net income £125,140, allowance nil; £37,700 at 20% is £7,540 and £87,440 at 40% is £34,976, a total of £42,516. The bonus has cost £15,084, which is 60% of £25,140. US (assumed 24%): £30,034 before credits, fully covered. US tax payable nil. Excess credit £12,482. Combined tax £42,516.
Bonus matched by a £25,140 gross pension contribution, treaty position taken on the US return. UK: adjusted net income £100,000, tax £27,432. US: the contribution is excluded, earnings £100,000, tax before credits £24,000, fully covered. US tax payable nil. Excess credit £3,432. Combined tax £27,432, a saving of £15,084.
Same contribution, no treaty position, contribution left in US income. UK: tax £27,432. US: earnings £125,140, tax before credits £30,034, credit limited to the £27,432 of UK tax paid. US tax payable £2,602 unless covered by credits carried from other years. Combined tax £30,034, a saving of £12,482 rather than £15,084.

The UK saving is identical in the last two lines, but the combined saving is not, because in the final line the US tax has risen to fill part of the gap. In the no-action line the client has paid £15,084 of UK tax on the bonus and holds a £12,482 credit pool that she may never use. With a different assumed US rate the figures move but the pattern does not, and the real computation is done on Form 1116 and, where the treaty position is disclosed, Form 8833.

How does bonus timing work across the UK and US tax years?

The UK tax year shown on GOV.UK runs from 6 April to 5 April; the US tax year for an individual is normally the calendar year. A bonus paid in February or March therefore falls at the end of one UK tax year and at the start of a US year. A bonus paid a few weeks later, after 5 April, falls in the next UK tax year but in the same US calendar year. The UK band is tested on each UK year's adjusted net income separately, so the UK year in which the bonus is received determines which year's allowance is withdrawn.

Several consequences follow for preparing the two returns together:

A pension contribution or Gift Aid donation only reduces adjusted net income for the UK year to which it is attributed. We check the date and the UK year of every contribution and donation against the date the bonus was paid.
The US return for a calendar year draws its UK income from two UK tax years. We apportion the UK tax accordingly, using payroll withholding by pay date and Self Assessment payments on the basis the client uses for the credit, kept consistent from year to year.
Deferred bonuses and share awards that vest in a later year can place a second receipt in a UK year that already contains a cash bonus. We ask for the vesting schedule at the outset.

The failure mode we see most often is UK tax on a bonus claimed as a credit in a different US year from the income, which shows an apparent US liability in one year and an inflated excess in the other.

Does the band interact with other UK thresholds based on adjusted net income?

Adjusted net income is used for more than the personal allowance. HMRC's guidance confirms that the High Income Child Benefit Charge applies where adjusted net income is above £60,000, and its example of Clara, with adjusted net income of £64,000 after pension contributions and a grossed-up Gift Aid donation of £1,250, shows the same reliefs being used to measure that threshold. A client who is managing adjusted net income for the 60% band is therefore already using the figure that drives the child benefit charge for the household.

Other government support, including some childcare schemes, has its own income tests. The adjusted net income guidance does not set out those limits, so we do not quote them here and take them from the relevant GOV.UK scheme pages for the year in question. A lost entitlement of that kind is a UK cost with no foreign tax credit on the US return to offset it.

What changes for married couples where one spouse is in the band?

The UK taxes each spouse as an individual. Each has their own personal allowance and their own adjusted net income, and the £100,000 limit is tested person by person. A couple with one spouse on £125,140 and the other on a modest income pays the 60% rate on the higher earner's top slice, whereas the same total split more evenly would not. The US, by contrast, allows a married couple to file jointly and pools their income and their foreign tax credit limitation.

That difference produces several preparation points. Investment income held in the higher earner's name adds to adjusted net income; the same income in the other spouse's name does not, but on a joint US return it is reported either way. Where the other spouse is not a US person, the couple must decide between separate filing and an election to treat that spouse as a US resident for a joint return, which brings the spouse's worldwide income into US tax and, as the IRS notes on its treaty benefits page, generally prevents that spouse from claiming treaty benefits as a foreign resident. We compute both filing statuses each year for couples in this position, because the answer changes as the bonus changes.

How we prepare both returns consistently for a client in the band

Our process produces one set of facts and two computations. We compute adjusted net income from worldwide income, establish how any pension contribution was made, because salary exchange and personal contributions appear differently on the UK return and in the US wage figure, record any treaty position with its article and amount, address Form 8833, and confirm a charity's status under both systems before treating a gift as relieved twice.

We then prepare Form 1116 by category, reconcile UK tax paid to each of the two UK years that overlap the US year, and update the carryback and ten-year carryforward schedule. The client receives both returns with a reconciliation showing where each UK figure appears on the US return. This is tax preparation and compliance work: we report what was done, on the correct forms, so that the two returns read consistently if either tax authority looks at the other.

If your UK income is likely to fall between £100,000 and £125,140 and you also file in the United States, have both returns prepared by the same team from the same records, so that the pension, Gift Aid and bonus entries agree on both sides and the credit pool is tracked from the first year.