Update for high income earners
Approximately £7bn will be raised from this Budget from high income earners in the UK!
The sting will be administered in three pronged attack via higher tax rates, stripping away of personal allowances and restricted pension relief.
Super-tax at 50%
In a surprise move Chancellor Alistair Darling confirmed the new 'super-tax' rate for those who earn over £150,000 will come in a year earlier than expected and be 50% rather than the previously proposed 45%. So those on higher incomes have less than one year, until 6 April 2010, to consider their options before facing the highest tax rate in two decades. Coupled with national insurance contribution increases that are scheduled from April 2011, the new highest tax rate will be 51.5% for employees.
Personal allowances taper away
Any individual earning a six-figure income will see their personal allowance begin to taper away with effect from 6 April 2010.
Any basic personal allowance will be reduced by up to 100%, at the rate of £1 for every £2 of income above £100,000. Based on the current personal allowance of £6,475, this would mean the full allowance would be extinguished at an income level of £112,950.
A further blow for higher earners is the announcement of a restriction on the availability of higher rate tax relief on pension contributions with effect from 6 April 2011, for individuals with taxable income in excess of £150,000.
What to do?
If you feel you may be affected by these issues there is still time to look at your planning options. Please call for further advice.