Many people we speak to are blissfully unaware that HMRC has confiscated their personal allowance (the amount you can earn without paying tax on it) because they earn ‘too much’.
This move back in April last year by HMRC, to increase the tax take to relieve the grim economic situation, has slipped past many of the affected.
Since April 2010, people with ‘net adjusted annual income’ of over of £100,000 had their personal allowance reduced or even removed. The reduction is at a rate of £1 for every £2 of income over £100,000.
Based on the current personal allowance, this means that anyone with income over £114,950 will lose their full personal allowance completely. This means that £7,475 of income for such higher earners is now being taxed at 40% or even 50%, whereas before it was not taxed at all.
If you would like more information on this or to speak with us about the planning opportunities to mitigate this change, please feel free get in touch.