When Voting In May – Remember Labour’s Highest Rate Of Tax Is 60%!

Ray Stewart General, Tax Matters Leave a Comment

Having discussed tax with a high earning client earlier today, I was suprised they hadn’t realized there is a current highest rate for some earners of 60%.  So I thought if one person didn’t know then there are probably a few more out there that ought to be informed before [private_basic]they cast a vote on May 6th.

OK.  It isn’t a universal tax rate.  It only applies to some people whose income falls into a certain range, but it is only too real and needs to be planned for and avoided if at all possible.

The 60% rate applies to people whose income falls between £100,000 and £112,950.  The rate is a stealth rate and it happens within that particular band of income because the personal allowance is gradually removed.  In living memory it has been a convention that every person is entitled to a tax free allowance from birth.  Our esteemed (ex) Prime Minister has decided to rake in some more cash for the bankrupt treasury by deciding people with a certain income can now afford to relinquish this tax free allowance.  This year the personal allowance is £6,475 and gets restricted by £1 for every £2 your income is over £100,000 and so by the time your income hits £112,950 you will have no personal allowance left.

The maths are simple.  For someone earning £100,000 who receives a £10,000 bonus, the extra tax on the bonus is £4,000 (40%) but then they lose £5,000 of their personal allowance which gives another extra tax bill of £2,000 (40% of the £5,000).  This means the total tax on the £10,000 bonus is £6,000 – or 60%.

Isn’t our government wonderful the way they slide these things in without the public noticing.  I wonder what else Gordon Brown will hit us with if he gets returned to Downing Street.

~Ray[/private_basic]

Ray Stewart
I am a qualified Certified Practising Accountant having passed my final exams way back in 1981. I actually can’t believe that was 37 years ago!! Anyway, I am now in my 60’s and I have been running my own business since May 1983. And before you ask, no, I have never regretted a moment of it! Part of the membership requirements of my professional body now dictate that I spend quite a lot of time on “CPD” - continuing professional education (one of their better ideas) - and over the last two years I decided to study business growth and marketing. I have learnt such a lot and that knowledge has radically changed my old “accountants” approach to business. It has made such a difference to the way I work and operate I feel that I just have to pass on this knowledge. It is simply too powerful to hold back!! - but I will try and do it in simple terms rather than expecting you to spend hours, as I had to, working through the difficult language that trainers seem to use to pass on their concepts. I hope you find the blog a useful resource and interesting place to visit as the months pass. I will do my best to keep up the flow - but if there are any topics you would like me to cover, then please let me know. Ray Stewart
Ray Stewart
Ray Stewart

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