News
UK Households Face Potential 60% Tax Rate Starting in April
Starting in April, households in the United Kingdom may face an effective income tax rate of 60%. This is due to a reduction in personal allowance for those earning over £100,000.
While the highest advertised income tax rate in the UK is 45%, many individuals could effectively pay 60% on some of their earnings, according to Birmingham Mail reporting. Fidelity International explained that a personal allowance of £12,570 exists, wherein this amount of income is not taxed. However, this allowance decreases as income exceeds £100,000. This creates a situation where part of their income is taxed at an effective 60% rate. According to SJP, for every £100 earned between £100,000 and £125,140, £40 is deducted for income tax, and an additional £20 is lost due to the personal allowance reduction.
Key Facts
- Starting in April, some UK households may face a 60% income tax rate.
- The highest advertised income tax rate in the UK is 45%.
- The effective 60% rate applies to income between £100,000 and £125,140.
- A personal allowance of £12,570 is typically untaxed.
- The personal allowance decreases for incomes surpassing £100,000.
- For every £100 earned between £100,000 and £125,140, £40 is deducted for income tax.
- An additional £20 is lost from the tapering of the personal allowance for every £100 earned in the specified range.
Primary Source
Research Sources
- Birmingham Mail — HMRC set to tax UK households at 60% rather than 45% as advertised