From 6 April 2010 the 50% income tax rate comes into play – for those with income over £150,000. For those earning over £100,000 personal allowances are withdrawn, creating an eye-watering marginal rate of 61.5%
There are options. If you are concerned about the impact of this new tax band on your taxed income do call there may be planning opportunities we could discuss with you prior to the end of the current tax year.
How do these new tax changes apply?
- If your income exceeds £100,000 the basic personal allowance will be withdrawn at the rate of £1 for each £2 your income exceeds £100,000. If personal allowances stay at the present level £6,475, you will lose your allowance completely when your income exceeds £112,950. As you will be taxed at 40% on your income between £100,000 and £112,950, whilst progressively losing your personal allowance, the marginal tax rate in this banding can be up to 60% and there is also national insurance, making 61.5% in total.
If you have a legitimate strategy to keep your taxable income below £100,000 in 2010-11 and so potentially save 61.5% tax this would be an opportunity not to miss. Call us if you are affected.
From 6 April 2011 higher rate pension relief is being withdrawn from individuals who earn in excess of £150,000 a year.