In spite of the country’s economic woes, it may surprise you to know that the numbers are increasing. Two years ago, in the 2009/10 tax year, there were over half a million fewer higher rate taxpayers and no additional rate tax payers – 50% tax did not arrive until April 2010.
The coming tax year will probably see this upward trend continue. Although your personal allowance will increase by £630 in 2012/13, the band of income on which you pay only basic rate tax will shrink by an equal amount, so the higher rate tax threshold will be unchanged at £42,475.
The income threshold at which the personal allowance is phased out will remain at £100,000, while the additional rate will once more start at £150,000 of income.
Freezing thresholds in the face of inflation is one of the oldest and most frequently used techniques in the Treasury’s extensive armoury of stealth taxes. It is likely that this well-tried method will continue to be used to gather extra revenue over the coming years. The state of the Government’s finances, combined with the politics of coalition government, rule out anything approaching tax cuts at higher income levels.
The message is clear: if you want to reduce the amount of tax you pay, then the solution is in your hands.
Our blog over the coming weeks will explore the four key planning areas for higher and additional rate taxpayers:
*Income tax mitigation
*How to efficiently realise capital gains
*The key importance of pension provision planning
*How tax affects your choice of investment structures.
Thinking and planning ahead could help you to lessen the burden of higher tax rates – and we’re always here to help!
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