In his 2009 Budget the Chancellor announced The reduction, from 2010/11 of personal allowances for those earning over £100,000.
He also announced restrictions on tax relief for high income individuals from 6 April 2011.
As a result of the recent Budget there is good news and bad news!
First the bad news ..... The reduction in the personal allowance has not been changed. Those earning over £100,000 will lose some or all of their personal allowance. Now the good news....You can do something about it!
More good news...... The restrictions on tax relief for high income individuals will not go ahead in their present form.
And a bit more bad news!.... Instead the Government is considering reducing the annual allowance to a level that raises at least the same amount of revenue and considers that a figure of £30,000 to £45,000 would achieve that.
So what does this mean to you and what can you do about it?
The fact that each person has their own personal allowance and their own starting and basic rate tax bands means that worthwhile overall income tax saving opportunities exist for 2010/11. This is especially so in regard to income that falls between £100,000 - £112,950 - causing the removal of the personal allowance and an effective tax rate of 60%.
Those individuals with ‘relevant earnings' of less than £130,000 in tax year 2010/11(and in the two immediately preceding tax years) should consider maximizing their pension savings in tax year 2010/11. Such savings will not be subject to any special annual allowance tax charge.
Those individuals with ‘relevant earnings' of £130,000 or more in any of tax years 2008/09 to 2010/11 will be subject to a special annual allowance tax charge on any pension savings in 2010/11 that exceed the greater of their special annual allowance and any protected pension input. Full advantage should be taken of their special annual allowance (ie normally £20,000 but potentially up to £30,000) and protected pension input.
More information
If you would like to discuss the implication of the budget in more detail or require further information, please contact either your Lorica Account Manager or email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it , tel: 0845 218 3000
