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50% tax rate and Personal Allowance clawback

50% tax rate and Personal Allowance clawback
Richard Rowell
Written by Richard Rowell
Tuesday, 09 March 2010 00:00

The new tax year is nearly upon us and from 2010/11 year there are two significant changes for higher earnining employees.

The first change is the highly publicised new 50% tax rate for income above £150,000. If you have employees paid at this level March sees your last chance to benefit from the lower rates in 2009/10.

There is a small window of opportunity left to apply a simple strategy. If you have any bonuses in the pipeline for your high paid employees you could advance them pay before 5 April 2010, with your employees benefitting by a 10% tax saving.

The second change that doesn't seem to have made the headlines as much is the clawback of personal allowance. This affects employees where total taxable income exceeds £100,000. An individual's personal allowance will be reduced by £1 for every £2 of adjusted net income over £100,000.

This means that there is an effective 60% rate of tax on income between £100,000 and £112,000. If you have employees in this earnings range we suggest that you review their tax position.

As ever please take advice on your specific circumstances before taking action.

Richard Rowell

Richard is the CEO of Dataplan Payroll Limited and is also responsible for the ideas and development of Dataplan's innovative technology solutions such as ePaysafe.

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