Prime 10% pay greater than half of revenue tax

The highest 10% of earners pay 59% of all revenue tax, evaluation of presidency figures from Hargreaves Lansdown exhibits.

In the meantime the highest 25% of taxpayers can pay 76% of all revenue tax this yr.

Sarah Coles, head of non-public finance, Hargreaves Lansdown, mentioned: “Increased earners are all the time going to be within the body for extra tax.

“They earn extra, have the broadest shoulders, and can carry a lot of the burden. Nonetheless, the extent of tax they face has ramped up considerably, and because of frozen tax thresholds, it applies to lots of those that don’t contemplate themselves to be super-rich. It means it’s price attending to grips with tax hacks for larger earners.”

For those who earn £47,400 that places you within the 25% of revenue taxpayers, whereas in case you earn over £71,600 you’re within the high 10%.

The portion of their revenue that falls between £100,000 and £125,140 is taxed notably closely. For each £2 you earn over £100,000 you lose £1 of your private allowance.

By the point you earn £125,140 you’ve misplaced the lot, so on that chunk of your wage you successfully pay 60% tax.

In case you have youngsters, it’s even harder, as a result of at £100,000 you lose authorities help for childcare. When you’ve breached £125,140 you pay 45% on the additional.

Hargreaves Lansdown supplied the next ‘tax hacks’ for larger earners:

1. Verify in case your employer operates a wage sacrifice scheme, the place you hand over a portion of your wage, and spend it on sure issues freed from tax – together with pensions. It will cut back the quantity of revenue you pay larger tax charges on. It could additionally carry you down under tax thresholds – together with the £100,000 cliff edge. See if you should utilize the scheme for any bonus too.
2. For those who don’t have entry to wage sacrifice, you may nonetheless pay right into a SIPP and obtain tax aid at your highest marginal price.
3. You possibly can carry ahead any unused annual pensions allowance from the earlier three tax years – so long as it doesn’t add as much as greater than your revenue this yr.
4. For those who’re making revenue from financial savings curiosity, use a money ISA to guard as a lot as doable from tax.
5. Reap the benefits of shares and shares ISA allowances – the place your investments are protected against dividend tax and capital good points tax.
6. Don’t cling about when utilizing your allowances. There are rumours the money ISA allowance may very well be reduce, and whereas that is nonetheless solely a hearsay, and any potential cuts wouldn’t essentially come within the present tax yr, it’s possible you’ll need to act when you know the place you stand.
7. If you have already got investments outdoors an ISA, you may transfer them inside utilizing this yr’s allowance – by way of the Mattress & ISA course of.
8. In case you have investments outdoors an ISA and have already used your allowance for this tax yr, you need to contemplate realising as much as £3,000 of good points, so that you reap the benefits of this yr’s CGT allowance.
9. Plan as a pair. For those who’re married or in a civil partnership and your accomplice pays a decrease price of tax, you may switch income-producing property into their title, so that you each reap the benefits of your ISAs and tax allowances, after which the remainder is taxed at their marginal price somewhat than yours.
10. Don’t overlook your youngsters. Within the present tax yr, it can save you or make investments £9,000 in a Junior ISA for any qualifying little one, and all curiosity, dividends or capital good points are tax free.
11. Think about whether or not a Enterprise Capital Belief or Enterprise Funding Scheme meet your wants. These aren’t proper for everybody, as a result of they’re very excessive threat so ought to solely be thought of as a small half of a big and numerous portfolio. Nonetheless, in case you use these schemes, you will get 30% revenue tax aid on the quantity you make investments – which can cut back your general tax invoice.”
12. For those who’ll earn much less in future, contemplate deferring revenue. If there’s a time while you anticipate to be paying a decrease price of tax, contemplate whether or not you may take revenue then somewhat than now. You possibly can, for instance, use mounted time period financial savings that pay curiosity yearly, as a substitute of easy accessibility paying extra continuously. This usually is smart simply earlier than retirement.”