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Is the top rate of UK income tax in England 45%?

Answer. Yes and no.


While the top rate is 45% (payable on income above £150,00) you may end up paying 60% well before you earn that much. There is the mystery zone of income from £100,000 to £150,000 and it is easy to get caught out when simple HMRC allowable actions can help you.

Income

Tax

Tax Rate on Increase in Income

Effective Rate

£100,000

£27,432

0%

27%

£105,000

£30,432

60%

29%

£110,000

£33,432

60%

30%

£120,000

£39,432

60%

33%

£125,140

£42,516

60%

34%

£130,000

£44,460

40%

34%

This is due to the gradual loss of personal allowances once your income reaches £100,000. Not only are you paying tax at 40%. You lose £1 of allowances for every £2 you earn over £100,000, so you effectively pay 40% on every £1 of allowance you lose!


Example

A person earning £110,000 pa would pay £33,432 in tax. By using a legally available investment, they would pay £28,932 in tax. A saving of £4,500 in tax and a change of effective reduction of the tax rate from 30% to 26.3%.


This can be managed with effective planning & strategies – If you would like to discuss your particular circumstances you can arrange an initial FREE consultation by simply clicking here.

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