The 60% tax trap and how to avoid it

Although the headline highest rate of income tax is 45%, many people will be paying a marginal rate of 60% and not even be aware of it.

That is because, as your income exceeds £100,000 you start to lose £1 of personal allowance for every £2 of income above that figure, up to £125,140.

Consequently, within that particular bracket your 40% tax becomes 60%. For someone who might not consider themselves to be a particularly big earner, that’s a bitter pill to swallow.

Can it be avoided? Well yes, possibly. Making gift aid contributions or personal pension contributions can both help to lower taxable income within that band.

60% tax relief on a pension contribution is not to be sniffed at, in anyone’s eyes.

Get in touch if you fall into this 60% bracket and let’s see what we can save you.