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Britain’s wealthiest to lose 3% of their income

Britain’s wealthiest to lose 3% of their income

The richest 10% of the UK’s population is set to lose an average 3% of their net income due to the complex tax changes that come into force this April, according to the Institute of Fiscal Studies.

750,000 more people will need to pay tax at the higher 40% rate because the government has reduced the threshold at which this rate takes effect. High earners will also need to pay more national insurance and will face restrictions on the tax free amount they can invest in their pension fund.

Contractor accountants earning over £150,000 now have to pay tax at 50% on all earned income above that amount and those with income above £100,000 have lost their personal tax allowance.

Child tax credit changes will also cause a large increase in marginal tax for the 175,000 adults who earn about £40,000 a year.

It’s not only employees that will be affected by these changes. High earning contractors should make sure they understand how the tax changes will affect them. One of the biggest changes, and one that a lot of people do not seem to be aware of, is the reduction in pension tax relief.

At present an individual can save £255,000 a year in their pension fund and obtain tax relief. As from April, that figure drops down to just £50,000. This new rule could have an adverse affect on people who pile a lot of money into their pension fund as they approach retirement age.

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Image: Luxury tax Increase by Señor Codo

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