{"id":27140,"date":"2024-08-12T09:22:33","date_gmt":"2024-08-12T08:22:33","guid":{"rendered":"https:\/\/smh.group\/?p=27140"},"modified":"2024-08-12T09:22:33","modified_gmt":"2024-08-12T08:22:33","slug":"the-60-tax-trap-explained","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/the-60-tax-trap-explained\/","title":{"rendered":"The 60% Tax Trap Explained"},"content":{"rendered":"

The number of taxpayers affected by the 60% tax trap has surged by nearly 25% over the past year. More than 500,000 people are now affected by higher tax rates due to earning more than \u00a3100,000.<\/strong><\/p>\n

The 60% rate applies to income between \u00a3100,000 and \u00a3125,140. This is the tranche of income which sees the \u00a312,570 personal allowance tapered away.<\/p>\n

Fiscal drag<\/strong><\/p>\n

There has been no change in the \u00a3100,000 income limit since the withdrawal of the personal allowance was introduced in 2010, a classic case of fiscal drag. Once the personal allowance is fully withdrawn, higher earners pay the additional rate of 45% on income in excess of \u00a3125,140. However, the 60% charge still applies to income between \u00a3100,000 and \u00a3125,140.<\/p>\n

The past year has seen a particularly high increase in individuals caught by the 60% tax trap due to inflation driving up salaries. The government is unlikely to fix the problem by reinstating the personal allowance for higher earners \u2013 the cost would be prohibitive. However, smoothing the transition is a possibility. For example, tapering the personal allowance by \u00a31 for every \u00a34 (rather than \u00a32) that income exceeds \u00a3100,000 would reduce the 60% tax rate to a rate of 50%.<\/p>\n

Planning measures<\/strong><\/p>\n

Measures that can be taken to mitigate the 60% tax trap vary from individual to individual:<\/p>\n