{"id":22035,"date":"2022-07-07T14:54:01","date_gmt":"2022-07-07T14:54:01","guid":{"rendered":"https:\/\/smh.group\/?p=22035"},"modified":"2023-02-15T13:18:58","modified_gmt":"2023-02-15T13:18:58","slug":"income-tax-back-up-to-60","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/income-tax-back-up-to-60\/","title":{"rendered":"60% income tax reappears"},"content":{"rendered":"

Back in news is the high marginal tax rates created by phasing out the personal allowance.<\/strong><\/p>\n

\u2018A million to pay 60% income tax<\/strong><\/span><\/a> within years,\u2019 ran a recent headline in The<\/em> Sunday Telegraph<\/em>. The next day The Times<\/em> picked up on the same story with the article \u2018Inflation may leave million more workers paying 60% tax\u2019.<\/p>\n

Whether either article counts as \u2018news\u2019 is debatable. The 60% income tax rate (or 61.5% on earnings in Scotland) has been around, in one form or another, since 2010\/11. It is not, as The Times<\/em> suggested, the result of \u2018a glitch in the personal allowance regime\u2019 but was the product of a carefully crafted piece of legislation. At the time, the aim was to raise extra revenue while keeping the threshold for the newly introduced 50% additional rate tax at \u00a3150,000.<\/p>\n

How the 60% tax rate happens<\/strong><\/h2>\n

In 2022\/23, Yasmin expects to have an income of \u00a3100,000 and is therefore entitled to a personal allowance of \u00a312,570. If she receives an unexpected bonus of \u00a310,000, her total income will be \u00a3110,000 and her personal allowance will be reduced by half of the amount by which her total income exceeds \u00a3100,000 \u2013 i.e. \u00a35,000. As a result, she will not only pay tax of \u00a34,000 on her bonus (at 40% outside Scotland), but she will also have to pay \u00a32,000 of tax on the \u00a35,000 of her income no longer covered by the personal allowance. The result is:<\/p>\n

\u00a0\u00a0\u00a0Total extra tax\u00a0\u00a0\u00a0 <\/u>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0=\u00a0\u00a0\u00a0 \u00a34,000 + \u00a32,000<\/u> x 100% = 60%
\nTotal extra income\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0 \u00a310,000<\/p>\n

If Yasmin received a bonus of over \u00a325,140, she would lose all her personal allowance.<\/p>\n

The newspaper articles indirectly highlighted that’s<\/p>\n