Alert - Taxation - The new 50% income tax rate

    November 2009

    The new 50% income tax rate

    From April 2010, where an individual's income is above £150,000, his or her marginal income tax rate will increase to 50%. This will be accompanied by a partial withdrawal of income tax relief on pension contributions for these high earners, which will make effective planning for the new regime particularly difficult.

    Planning opportunities

    Mitigating the effect of the new 50% rate of income tax will involve a combination of making the most of the current 40% rate while it is still available and identifying what action can be taken on an ongoing basis.

    In addition to considering accelerating payments (such as bonuses and share scheme maturities) so that they are paid before 6 April 2010, some high earners may consider deferring income (particularly share scheme payouts) in the hope that the top rate of income tax will be reduced in the future.