If your taxable income exceeds £100,000 you will suffer a reduction in your personal tax allowance.
For every £2 that your income exceeds £100,000, £1 will be knocked off your allowance. The reduction is progressive and means that once your income exceeds £125,140 your personal allowance of £12,570 will be reduced to zero.
As Income Taxpayers with income in the range, £100,000 to £125,140, are paying tax at 40%, the gradual loss of the personal tax allowance means that the effective rate of tax in this range is 60% not 40%.
Accordingly, if you are affected by this process, tax planning to reduce your income below the £100,000 threshold would be cost effective.
This may involve consideration of pension top-ups, deferring income, sacrificing salary for additional holidays, or other planning options that may be available to you.
Please call so we can help you consider your options.