Avoiding the 60% rate

You will not see the 60% tax rate in any official literature, but this is the effective income tax rate for the first £13,000 of income above £100,000 as the personal allowance is lost to the extent of £1 for every £2 by which income exceeds £100,000.

There are two key routes to steer clear of the 60% rate - reduce income or increase allowances. The former would mean that, especially if your income fluctuates, you might defer income from one year until the next.

There is limited scope for increasing allowances, but pension premiums - which score for 20% immediate relief on payments and the balance through self-assessment - would be effective.

We can help you plan to minimise the impact of the new tax rates - please contact your usual Littlejohn tax adviser or tax@littlejohnllp.com for more information.