Perennial Wealth: Earning more than £100,000? Here’s how to avoid the 60% tax trap

When your salary exceeds the £100,000 threshold, you can fall into a tax trap that leaves you paying a 60% rate on a portion of your earnings.

Most people have a tax-free Personal Allowance of £12,570, but your Personal Allowance tapers by £1 for every £2 over £100,000 you earn.

This means you can pay a 60% tax rate on the portion of your income between £100,000 and £125,140.

One method to avoid this trap is to pay some of your earnings into your pension.

Making additional pension contributions from your income over £100,000 not only lets you claim tax relief on the amount you place into your pension but also reduces your taxable income back to a level where you can regain some of the Personal Allowance you may otherwise have lost.

If you earn more than £100,000, pension contributions can be an extremely tax-efficient way of saving for your future. In certain cases, you can benefit from effectively 60% tax relief on your contributions.

We can help you make the most of your income over £100,000 and ensure you don’t fall into tax traps. To find out more, get in touch.

For a free consultation, call 0117 959 6499 or email
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