Alert - Taxation - The 60% Tax Trap

    October 2009

    Extra tax for key employees

    From April 2010 if your income is above £100,000, you will lose the right to claim some or all of your personal allowance. Once your income exceeds £113,000, you will not be entitled to any personal allowance. This means that income in this band will be taxed at an effective rate of 60% - higher than the 50% rate being introduced for people earning more than £150,000.

    The new rules will come as an unpleasant surprise to many people and could be demotivating for anyone caught in the "trap". Any pay rise or bonus that pushes someone's taxable income (from all sources - salary, share schemes, interest, dividends and property) above £100,000 will be much less valuable to them. A rise of £10,000 will only be worth £3,900 after tax and