There are traps galore within the tax bands, as the planned increase in the personal allowance to £10,000 in the lifetime of this Parliament is linked to a determination that 40% taxpayers will not gain much of an advantage overall. This is achieved by reducing the income level at which the 40% tax rate starts to bite. For 2012/13 it will be gross income of £42,475 and for 2013/14 the figure is £41,450. The result is that 300,000 taxpayers will become 40% taxpayers without enjoying an increase in their income!
If this is likely to affect you we can discuss possible ways around this trap for your particular circumstances.
We mentioned last month that even more people stand to suffer a marginal tax rate of 60% in 2013/14 than ever before. This is because the trap will apply to those with taxable income between £100,000 and an increased amount of £118,410. This is one tax trap it pays to avoid, as at that level of income you should be paying tax at 40% rather than 60%.
There are several techniques to avoid all this – please contact us for help so you plan ahead in plenty of time.
If you tend to claim tax reliefs which do not have any specific monetary limit, this is all going to change from 6 April 2013. Specifically, there will be a maximum amount on which you can claim tax relief, which will be the greater of 25% of your income or £50,000.
Careful planning will, therefore, be required, with the restriction likely to apply to tax reliefs such as loan interest and charitable donations.
April 11th, 2012
