Losing your personal income tax allowance

Industry News - 30th May 2023

If you earn over £100,000 in any tax year, your personal income tax allowance is gradually reduced by £1 for every £2 of adjusted net income over £100,000, irrespective of age. This means that any taxable receipt that boosts your income over £100,000 will result in a reduction in personal tax allowances. Accordingly, your personal income tax allowance would be reduced to zero if your adjusted net income is £125,140 or above.

Your adjusted net income is your total taxable income before any personal allowances, less certain tax reliefs such as trading losses and certain charitable donations and pension contributions.

For the current tax year, if your adjusted net income is likely to fall between £100,000 and £125,140, you would pay an effective marginal rate of tax of 60%.

If your income sits within this band, you may want to consider the range of financial planning opportunities available. For example, giving gifts to charity, increasing pension contributions and participating in certain investment schemes. Please take advice from a trusted and reputable independent financial adviser (IFA) on pension and investment options.

Contact us for more information on personal income tax allowances.

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