Tax Tip: Is your taxable income over £100K?

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).

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