It’s not what you earn, it's what you keep that matters!
Chancellor hits hard at higher earners!
The Chancellor has not only brought forward tax proposals which were to take place in 2011, he has also made changes to his original announcements:
- The personal allowance will be subject to an income limit of £100,000. An individual’s personal allowance will be reduced by £1 for every £2 of adjusted net income above the income limit. The personal allowance will be reduced to nil from this income limit instead of the proposed two stage reduction announced in 2008;
- Income tax. Instead of introducing a 45% top rate of tax in 2011, a new rate of income tax will be introduced of 50% from 6 April 2010. This will apply to taxable income above £150,000;
- Dividend income is currently taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. A new rate of 42.5% will be introduced for dividends which fall into the income band above £150,000;
- Pensions – freezing of allowances. The annual allowance (AA) which effectively limits the amount of pension contributions which can be made by and on behalf of an individual had previously been set for all tax years up until 2010/11, with the amount for 2010/11 being £255,000. The AA will be frozen from 2011/12 to 2015/16 at £255,000 per annum;
- Pension contributions The government has announced its intention to restrict tax relief on pension savings with effect from 6 April 2011 for people with taxable income of £150,000 or more. The relief will be tapered down until it is 20%.
If you think you may be affected by these changes we recommend you speak to us NOW!
