This page: Angela has chosen wallpaper throughout the house that echoes the flora and fauna that surrounds the house, from Sanderson’s Owlswick paper in her daughter’s room to G P & J Baker’s Ferns on the top floor landing and downstairs loo and out.” On the top floor there is now a long gallery landing with a bedroom at each end and a bathroom in between. Having lived in London for 20 years and leaving behind a cosy network of friends when they moved, it was imperative to integrate a place for friends to stay into the house. The fern wallpaper at the top of the stairs, I notice, is mirrored priceless-magazines.com 44
ADVERTISEMENT FEATURE Earn over £100k? Beware the ‘60% tax trap’ While 45% is the highest ‘official’ income tax rate in England, Wales and Northern Ireland, the way the tax-free personal allowance is treated means that some people pay an effective tax rate of 60% on some of their income. Known as the ‘60% tax trap’, it applies to earnings between £100,000 and £125,140. Here, we explain how the tax trap works and why pensions could help you manage it. Income tax and the personal allowance Most people have a standard personal allowance of £12,570, which is the amount of income you do not pay tax on each year. If you have a standard personal allowance, the tax rates you’ll pay in each band of earnings are as follows: Band Taxable income Tax rate Personal allowance Up to £12,570 0% Basic rate £12,571 to £50,270 20% Higher rate £50,271 to £125,140 40% Additional rate Over £125,140 45% Source: HMRC Once you earn more than £100,000, your tax-free personal allowance starts to be tapered. It reduces by £1 for every £2 that your adjusted net income exceeds £100,000 and is zero if your income is £125,140 or above. Why the 60% tax trap occurs Imagine you earn £110,000 – or £10,000 above the threshold. You would not only pay £4,000 in higher rate tax on the £10,000, but you’d also lose £5,000 of your personal allowance. And with £5,000 of your personal allowance gone, that portion of your income is now also subject to tax at 40%, costing you another £2,000. In other words, of that £10,000, you’d only get to keep £4,000, which equates to a 60% tax rate. For Scottish residents, the effective rate of tax is even higher at 63%, as income in the higher rate tax band is taxed at 42% in Scotland. How to reinstate your personal allowance A way to mitigate the 60% tax trap is to save into a pension. If you earn £110,000 and make a gross pension contribution of £10,000, your adjusted net income falls to £100,000. This would reinstate your full personal allowance and give an effective rate of tax relief of 60% on your pension contribution. There is a cap on the amount you and your employer can pay into your pension each year and still get tax relief. For most people, this is 100% of your UK relevant earnings or £60,000, whichever is lower (this might be tapered if your adjusted income exceeds £260,000). If you exceed your annual allowance, you’ll have to pay an annual allowance charge which essentially claws back any tax relief received. Next steps Understanding how different tax rules might affect you isn’t easy, especially as the rules can change frequently. A financial adviser can help explain how the various rules affect your long-term financial planning and help decide the best course of action for you. We live and work local to you. We would be delighted to help you and your family achieve financial clarity and stability. Graeme Hayden Investment Manager Divisional Director E: graeme.hayden@brewin.co.uk Evelyn Iriajen Financial Advisor Assistant Director E: evelyn.iriajen@brewin.co.uk RBC Brewin Dolphin, 16 Lonsdale Gardens, Tunbridge Wells, TN1 1NU T: 01892 739580 W: www.brewin.co.uk/royal-tunbridge-wells The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office; 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. BDM5074 04/24_1
- Page 1 and 2: PRICELESS JUNE 2024 265 JUNE 2024 E
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Unlock potential MARLBOROUGH HOUSE
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TO ROCKETS From rocketry to bee-kee
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Fashion favourites Odyl’s Summer
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Cranbrook, Kent TN17 3PS New Collec
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Serving up Summer Charlotte Butterw
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Roast beetroot & blue cheese on sou
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Charlotte Butterworth is a private
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Beauty Bath treats & shower stars B
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Bath treats I’m going to skip ove
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More than just a pretty face Garden
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Garden Roses all the Way Jo Arnell
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Roses in the mixed border It was a
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THEATRE AT CHAPEL DOWN THEATRE AT C
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Jane Howard sheds some light on the