Are you a high-income earner in the UK? If so, you may have encountered the dreaded 60% tax trap – a situation where your effective tax rate can skyrocket to a staggering 60% or more. This guide is designed to help you understand the intricacies of this tax trap and provide strategies to minimise its impact on your finances.
Individuals earning between £100,00 and £125,140 with a restricted personal allowance are subject to the 60% tax trap. For every £100 of income between these figures, you will only receive £40 in the bank since £40 is paid in income tax and £20 is lost due to the fall in the personal allowance – effectively making your tax rate shoot up to a staggering 60% or more.
This particular issue is not new a new one and creates problems for a lot of people within and on the cusp of that earning bracket. For many, this can create disincentive to push for that next pay-rise, whilst for others, it can mean that thousands of pounds a year are lost through the tax man.
To navigate the 60% tax trap effectively, it’s crucial to understand the income thresholds at which it occurs. These thresholds can vary depending on your personal circumstances, such as your marital status, age, and whether you receive certain benefits or allowances.
Our guide provides a detailed breakdown of these thresholds, ensuring you have a clear understanding of when you might be affected. On top of this, it will also cover proven mitigation strategies, such as:
Explore tax-advantaged investment vehicles like ISAs and SIPPs to shelter your income from excessive taxation.
Can you put measures in place to mitigate this issue? Don’t let the 60% tax trap derail your financial goals. Gain a comprehensive understanding of this complex issue and take proactive steps to protect your hard-earned income. Our in-depth guide will empower you with the knowledge and strategies you need to navigate the tax trap successfully – whilst also creating a more secure financial future for yourself and your family.
Ready to start your tax-free savings journey with an ISA? Contact Morrinson Wealth today to discuss your options and how we can help you achieve your financial aspirations.
