What are the tax implications of earning over £100k?
One of the major tax implications of earning over £100k is that you start losing your Personal Allowance.
The dreaded (but unofficial) 60% tax rate. As soon as you start earning over £100,000, you gradually lose your £12,570 tax-free Personal Allowance, pound by pound.
For every £2 that you earn over £100,000, you lose £1 of your Personal Allowance.
Also, it is important to remember is that you will have to do a Self-Assessment tax return.
HMRC will check what’s known as your Adjusted Net Income when you do this, to work out whether you owe money or are due a refund based on your £100,000k+ salary.
Whatever tax you’re liable to pay, you will have to pay by law. That said, there are ways to be more tax efficient.
How to be more tax efficient:
Here’s a selection of things that you can do to improve your tax efficiency, avoiding the 60% tax trap:
1. Instead of your pay rise, take non-cash employee benefits such as a company car, private health insurance etc.
2. Increase the amount you pay into your pension
3. Donate to charity and claim the Gift Aid tax relief
4. Look for tax efficient investments
What to do next?
We understand how confusing this may be, but our team of experts are on hand to help YOU! Our accountancy services are available nationwide, including: Accrington, Bamber Bridge, Buckshaw Village, Blackburn, Burnley, Chorley, Colne, Clitheroe, Darwen, Hurst Green, Lancaster, Lostock Hall, Longridge, Leyland, Penwortham, Preston, Skipton and the surrounding areas.
