Currently in the UK (separate taxation tiers for Scotland) you begin to lose your ‘personal allowance’ if your income exceeds £100,000pa.
The current annual allowance (the tax free allowance of how much anyone can earn before having to pay income tax) in the current tax year 2020/21 is £12,500. This allowance is reduced by £1 for every £2 of net adjusted income above the £100,000 mark; meaning the allowance is entirely lost for income exceeding £125,000.
From here an individual may begin to pay a considerable amount of income tax.
Standard income tax rates are below (for England, Wales & N. Ireland):
If your earnings venture into territory exceeding £100,000 the loss of personal allowance can result in an effective tax rate of almost 60%.
A qualified adviser can assess your financial situation, and where appropriate the personal allowance can be ‘reclaimed’ via pension contributions.
Contact us to find out more:
+44 (0) 20 7220 1666 | enquiries@whirelandwm.com