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Chartered Financial Planners

Chartered Financial Planners - Independent

Tel: 01332 416585

Chartered Financial Planners

Chartered Financial Planners - Independent

Tel: 01332 416585

Tax Planning Help

60% Tax

The Personal Allowance (PA) represents the amount of income that an individual can earn free of income tax. The standard PA for those under 65 years old is £11,500 per annum (2017/18).

In April 2010 the Treasury introduced legislation that seeks to remove the personal allowance of those people earning over £100,000.

Since April 2010, people with ‘net adjusted annual income’ of over £100,000 will have their personal allowance reduced or even removed. The reduction is at a rate of £1 for every £2 of income over £100,000.

Based on the current standard personal allowance, this means that anyone with income over £120,000 will lose their personal allowance completely. This means that an additional £10,000 of income for such high earners is now being taxed at 40% or even 45%, whereas before this date it was not taxed at all. 45% on this £10,000 could mean additional income tax of £4,500.

The effective marginal tax rate on earnings between £100,000 and £120,000 is 60%.

There are various means by which those earning over £100k can consider to avoid some or all of the 60% tax.

  1. Annual gross personal pension contributions for example may be deducted from total annual earned income for the calculation of adjusted income.
  2. Make sure that non-taxpayers are invested in areas where they either get paid without deduction of tax, or can reclaim any taxes that have been paid
  3. Make sure that when a couple have investments, the income from those investments is classed as belonging to the partner in the lowest tax band. This can produce significant savings
  4. Moving investments that generate income from taxed to tax free environments can also reduce an individual’s ‘net adjusted annual income’.
  5. Certain donations to charity that qualify for gift aid can also reduce total income.

To find out more about our tax planning services get in touch with our team.

What our customers say

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Ginny is very easy to contact and always responds very promptly - she can explain complex financial issues very clearly and her advice has been very valuable in helping me decide how to take my pension fund – very important as options for funds are changing daily.

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Richard, Derbyshire