Income Tax Planning

Income Tax Planning

by Ashley Clark, Director - March 2010

Income tax rates are currently 10% (on certain investment income), 20% and 40%.  Four key changes will take place from 6 April 2010:-

(i) the standard personal allowance will be frozen at the 2009/10 rate (£6,475)

(ii) the threshold for the start of higher rate tax will be frozen at £37,400

(iii) a 50% tax charge will apply to taxable income that exceeds £150,000

(iv) people with income of more than £100,000 may find that they will lose some or all of their standard personal allowance.

The impact of (i) and (ii) will mean that even more people will fall into charge to higher rate tax – some purely down to a standard pay increase.  

The impact of (iii) and (iv) will mean that people with income of more than £150,000
and £100,000 respectively will pay even more tax.

There are a number of ways in which tax increases can be combated:-

(i) Maximising use of a couple’s allowances, reliefs and exemptions
(ii) Utilising tax exemptions and allowances
(iii) Using tax efficient investments