Changes to income tax that will affect all ‘high earners’ in the UK from the beginning of the next year come in to place from 6 April.
From April 2010, individuals with taxable income over £100,000 will have their personal (tax-free) allowance progressively withdrawn. Taxable income comprises base salary, bonus, all taxable benefits such as company car and private medical cover and any other income from savings and investments, so you may be affected even if your base salary is well below £100,000.
Based on the current personal allowance of £6,475, this means that an income between £100,000 and £112,950 will effectively be taxed at a rate of 60%. For every £2 of taxable income above £100,000, £1 of the personal allowance will be lost.
Therefore anyone with a taxable income of £112,950 or more will pay an additional £2,590 per annum in 2010/11, equivalent to a reduction in take-home pay of more than £200 per month.
In addition, the marginal tax rate for income over £150,000 is increased from 40% to 50%.
It is not clear how HM Revenue & Customs (HMRC) will deal with the proposed changes as far as they affect PAYE Notices of Coding. Individuals affected by these developments are advised to review their 2010/11 Notice (P2) carefully and contact your tax office with any queries.
For more information please visit www.hmrc.gov.uk
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