SNAPSHOT2 min read

60% income tax reappears

The high marginal tax rates created by phasing out the personal allowance are back in the news.

02/08/2022
death-of-the-office

‘A million to pay 60% income tax within years,’ ran a recent headline in The Sunday Telegraph. The next day The Times picked up on the same story with the article ‘Inflation may leave million more workers paying 60% tax’.

Whether either article counts as ‘news’ is debatable. The 60% income tax rate (or 61.5% on earnings in Scotland) has been around, in one form or another, since 2010/11. It is not, as The Times suggested, the result of ‘a glitch in the personal allowance regime’ but was the product of a carefully crafted piece of legislation. At the time, the aim was to raise extra revenue while keeping the threshold for the newly introduced 50% additional rate tax at £150,000.

60 tax rate

The newspaper articles indirectly highlighted that:

  • The £100,000 threshold at which the personal allowance is tapered has been unchanged since 2010; and
  • The personal allowance has almost doubled since 2010, resulting in a £25,140 band of income in which the 60% rate can bite.

Both factors mean that more taxpayers are being caught as incomes rise over time.

The one piece of good news is that if you are hit by 60% income tax you may also be able to claim 60% tax relief on pension contributions or gift aid.

Tax treatment varies according to individual circumstances and is subject to change.

The Financial Conduct Authority does not regulate tax advice.

Important Information

This publication has been prepared solely for informational purposes and is not an offer or a solicitation of an offer to buy or sell any security, product, service, or investment. The opinions expressed in this publication do not constitute investment advice. Should you require advice you should speak to your financial adviser. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Please note that for your security, calls to Aspect8 will be recorded. For further explanation of any financial terms, speak to your wealth manager. The data contained in this document has been sourced by Aspect8 and should be independently verified before further publication or use. Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider’s consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third-party data. Issued in August 2022 by Aspect8 Limited, registered address: Broadlands Business Campus, Langhurst Wood Road, RH12 4QP, number 07572431. Aspect8 Limited is an appointed representative of Best Practice IFA Group Ltd which is authorised and regulated by the Financial Conduct Authority FCA No. 227247.

Important information

The views and opinions contained herein are those of Benchmark Financial Planning. They do not necessarily represent views expressed or reflected in other Benchmark Financial Planning communications, strategies or funds and are subject to change. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable, but Benchmark Financial Planning does not warrant its completeness or accuracy. The data has been sourced by Benchmark Financial Planning and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. Benchmark Financial Planning is not responsible for the accuracy of the information contained within linked sites. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

Issued by Benchmark Financial Planning Limited. An Appointed Representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority, the registration number is 223112. Registered office: Broadlands Business Campus, Langhurst Wood Road, Horsham, West Sussex, RH12 4QP. Registered in England and Wales No 07572431.

Topics

Benchmark Financial Planning is an Appointed Representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority, the registration number is 223112. Registered office: Broadlands Business Campus, Langhurst Wood Road, Horsham, West Sussex, RH12 4QP. Registered in England and Wales No 07572431.

The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk

The guidance and/or advice contained within this website are subject to the UK regulatory regime and are therefore targeted at consumers based in the UK.