Can you avoid the 60% tax rate?

While references to the 60% tax rate will not be seen in any official literature, this is nevertheless the effective income tax rate for anyone with taxable income of more than £100,000 this year on a slice of income. The personal allowance is lost to the extent of £1 for every £2 by which their income exceeds £100,000, so the 60% rate applies to income between £100,001 and £114,950.

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

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.