If so, your personal allowances (of £11,500) are reduced by £1 for every £2 of income above £100K. This means that the effective rate of tax for income between £100K and £123K is 60%! You can consider either or both of the following as means to counter the impact of this effective rate:
- Consider making a donation or a gift – e.g. shares and/or land to a qualifying charity. For a £80 donation, a higher rate taxpayer can claim back the basic rate tax of £20 and a further 20% tax relief on the gross value, reducing the net cost to £60.
- Alternatively you could make a pension contribution (assuming you haven’t utilised your annual allowance of £40K and any unused allowances in the previous three years).
Elman Wall Blog 