Sarah Harris
- Position: Partner OCA
- Phone: +44 (0) 1753 551111
- Fax: +44 (0) 1753 550544
- Email: Sarah.Harris@ouryclark.com
The top rate of Income Tax will increase to 50% on 5th April 2010 for earned income over £150,000.
Additionally, those earning over £100,000 will have their tax free personal allowance reduced by £1 for every £2 they earn above the £100,000 threshold- this is an effective tax rate of 60%!
Planning Possibilities
Short Term/ One Off
- Consider bringing forward one off payments of bonuses or dividends so that they fall to be taxed at the existing lower rates.
- Partnerships and Sole Traders may wish to consider changing their accounting reference date to push more profits into 2009/10.
- Both of these measures would result in a lower tax bill, but payable sooner.
Longer Term
- Tax relief on pension contributions is also being restricted for high earners, but you should make sure you are taking full advantage of the relief that is available.
- Consider different sources of income:
- Dividends as apposed to salary (42.5% tax as apposed to 50%, and no National Insurance);
- Capital as apposed to income (18% tax as apposed to 50%, and again no National Insurance);
- Loans, or draw down on existing loan accounts.
- Consider alternative means of remunerating senior staff- e.g. share options and tax efficient benefits.
Please contact us to discuss any of the above in more detail.
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Tags: advice, income tax, Tax, tax rise
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