If your income is expected to exceed £100,000 for the first time, we would like to remind you of the effect this can have on your personal allowance and marginal tax rate.<\/p>\n
If you earn over £100,000 in any tax year your personal allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000 irrespective of age. This means that any taxable receipt that takes your income over £100,000 will result in a reduction in personal tax allowance. Your adjusted net income is your total taxable income before any personal allowances, less certain tax reliefs such as trading losses and certain charitable donations and pension contributions.<\/p>\n
For the current 2020-21 tax year if your adjusted net income is likely to fall between £100,000 and £125,000 you would pay an effective marginal rate of tax of 60%. This 60% rate arises as your £12,500 tax-free personal allowance is gradually reduced. If your income sits within this band you should consider what financial planning opportunities are available to avoid this personal allowance trap by trying to reduce your income below to £100,000. This can include giving gifts to charity, increasing pension contributions and participating in certain investment schemes.<\/p>\n
There is also an option for higher rate or additional rate taxpayers, who wanted to reduce their tax bill, to make a gift to charity in the current tax year and then elect to carry back the contribution to 2019-20. A request to carry back the donation must be made before or at the same time as the 2019-20 Self-Assessment return is completed i.e. by 31 January 2021.<\/p>\n
If your income is expected to exceed \u00a3100,000 for<\/p>\n","protected":false},"author":1,"featured_media":2177,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"acf":[],"yoast_head":"\n