Most individuals have a personal income tax allowance. This now depends on the year in which you were born. There is an additional income allowance available for individuals who are registered blind.
The income limit stands at £100,000 for personal allowances and at £27,700 for age-related allowances. When an individual’s ’adjusted net income’ exceeds their limit, their allowance is reduced by one half of the excess (i.e. for every £2 by which your income exceeds your allowance, your allowance is reduced by £1). Individuals with very high incomes may find their allowance reduced to nil.
For tax purposes, what we are interested in is your ‘taxable income’. This figure is calculated by adding together all sources of income, deducting any reliefs (e.g. for trade losses or interest payments) and finally deducting personal allowances.
The rate at which you pay tax depends on your tax band. There are currently three bands
In addition, different rates of tax are payable if the income is dividend income, other savings income or non-savings income.
At Strategic Tax we introduce structures that reduce your taxable income and shelter you from the highest rates. Each individual requires a tailor made solution and no two strategies will be the same. To find out how Strategic Tax could help you, we invite you to arrange an informal, no obligation consultation with us – contact us here.