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The taxman is reaching out to grab high earners!
by Haines Watts Tamworth on 24 January 2012
However, there are ways to help you loosen his grip. The tax squeeze on high earners means more and more people are thinking very seriously about tax efficient ways of managing their income.
There’s a 40 per cent tax rate for taxable earnings between £35,000 and £150,000, while those earning over £150,000 face a 50% rate. In certain circumstances you could end up paying an effective – and eye-watering – tax rate of around 64%.
In response, some owner/managers are deciding to leave cash in the company until tax rates are reduced to more reasonable levels.
Some high earners will make charitable contributions; others will see how they can shape inheritance tax liabilities so that they can pass their wealth down through their families.
Make sure you explore all avenues!
Other options to consider include:
- tax-efficient investments such as ISAs, venture capital trusts or enterprise investment schemes.
- relevant life policy (RLP) – a single life, stand-alone death-in-service plan. The benefits don’t form part of your annual or lifetime pension allowance and cover can be up to 15 times your salary.
- pension – new carry-forward rules may allow you to take advantage of unused allowances from previous years.
It could also be worth paying attention to basics such as your tax code, tax credits and whether you’ve paid too much tax on your savings – tax on interest is deducted at source.
At Haines Watts we’ll help you find the right tax solutions. Please contact us if you need any advice.
If you want any further information on this blog post please contact us.
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