In the next few weeks we will highlight the areas to watch out for where the marginal rate of income tax can be higher than expected.
This week we focus on the personal allowance.
For 2015/16 the personal allowance of £10,600 is reduced if your income exceeds £100,000.
The reduction is £1 for every £2 of income, if your income reaches £121,200 you will receive no personal allowance.
So watch out, if you earn between £100,000 and £121,200 your effective marginal tax rate will be 60% – due to the loss of your personal allowance.
It makes sense to manage your income if you can to avoid this tax banding, pension contributions and donations to your favourite charity can be good options to consider.
For further information please contact Lesley Sutton on 01484 550 037 or email email@example.com