Running a business can be full of financial ups and downs, but our clients sleep well knowing they count for more with us, as we take their financial stresses away, allowing them to focus on running their business.
Tax Planning Services for High Earners
If your annual income exceeds £100,000, or if your household claims Child Benefit and at least one member earns over £60,000, your tax situation becomes more complex. This can result in the loss of certain benefits, significantly increasing your tax burden—sometimes reaching up to 62% of your income. It may also lead to double taxation on your pension contributions.
For personalised advice tailored to your circumstances, Mark at Eastfield Accountants can assist – feel free to get in touch today.
Tax pitfalls for high earners
The following guide will help you navigate these pitfalls and highlight tax planning strategies to best suit your financial situation.
Additional compliance requirements
Earning over £100,000 no longer mandates the submission of a self-assessment tax return to HMRC, however, PAYE is often calculated incorrectly on high earning salaries, resulting in too much or too little tax being deducted.
Your Adjusted Net Income is crucial in determining additional tax charges and relief restrictions. This figure includes all taxable income, minus certain reliefs such as:
- Trading losses (if self-employed or in a partnership)
- Gift Aid donations
- Pension contributions
Understanding and managing your Adjusted Net Income can be complex, but it’s vital for effective tax planning. Let Mark guide you through the process to maximise your savings.
Here’s what our clients say!
Loss of Personal Allowance
The Personal Allowance, currently £12,570 (as of 2024), starts to phase out when your Adjusted Net Income exceeds £100,000. For every £2 you earn above this threshold, your allowance reduces by £1. Once you earn over £125,140, you lose your allowance entirely. This creates an effective tax rate of 60% on income between £100,000 and £125,140, leaving you with only 38p of every £1 earned in this range.
Loss of Child Benefit
If you or your partner earn more than £60,000, you may be required to pay back some or all of your Child Benefit. The repayment is calculated based on how much your Adjusted Net Income exceeds £60,000. If your income exceeds £60,000, the entire benefit must be repaid, making it simpler to opt out of receiving Child Benefit altogether.
Tapering of Annual Pension Contribution Allowance
The standard pension contribution allowance of £60,000 per year begins to taper once your Adjusted Income exceeds £260,000 and your Threshold Income surpasses £200,000. For every £2 of income over £260,000, your allowance reduces by £1, reaching a minimum allowance of £10,000. Exceeding this allowance incurs a tax charge at your marginal rate.
High earner tax planning opportunities
Pension contributions
Contributing up to £60,000 per year to your pension is highly tax-efficient, particularly for high earners. These contributions reduce your Adjusted Net Income, potentially saving you up to 62% in taxes. Additionally, salary sacrifice arrangements can also save National Insurance Contributions, benefiting both you and your employer.
Other salary sacrifice arrangements
Beyond pension contributions, salary sacrifice arrangements can also reduce your taxable income, offering savings on:
- Childcare vouchers
- Cycle-to-work schemes
- Ultra-low emission vehicles
- Retraining courses
- Buying additional annual leave
- Depending on your income, these arrangements can save you up to 62% in taxes.
Charitable donations
Donations made under Gift Aid not only provide tax benefits to the charity but also reduce your Adjusted Net Income, potentially saving you up to 60% in taxes.
Tax-efficient investments
While not directly alleviating the specific tax pitfalls for high earners, making tax-efficient investments is crucial for overall tax planning. Refer to our guide on tax-efficient investments for more details.
Partner with Eastfield Accountants for high earner tax strategies
Navigating the complexities of tax as a high earner requires careful planning. By understanding the potential pitfalls and exploring tax-saving opportunities, you can optimise your financial strategy and minimise your tax liabilities.
For personalised advice, contact Mark at Eastfield Accountants today. We’re here to help you make the most of your financial situation.
Tax
Related services
See below for other related services we provide to fully support your financial needs.
- Tax advice for UK non-residents
- UK Tax Returns & Advice for Australians
- Inheritance Tax & Estate Planning
- Worldwide Disclosure Facility
- Capital Gains Tax Advice
- Corporate Tax Planning
- Trust Tax Returns
- Self Assessment Tax Returns
Strategy, Tax
Tax advice for UK non-residents
Strategy, Tax
Navigating the complexities of tax obligations in the UK as a non-resident can be daunting. We are able to provide expert advice and services for UK non-residents ensuring that you comply with UK tax regulation.
Tax
UK Tax Returns & Advice for Australians
Tax
Mark specialises in assisting Australian tax residents relocating to the UK, helping them understand and comply with complex tax residency rules. Whether you're planning to move or are already residing in the UK, Mark can clarify your tax status and ensure adherence to UK tax laws.
Strategy, Tax
Inheritance Tax & Estate Planning
Strategy, Tax
Secure the future of your estate with our comprehensive inheritance tax and estate planning services. We offer expert guidance in structuring your assets, minimising inheritance tax liabilities, and creating a lasting legacy for your loved ones. Trust us to provide tailored solutions that ensure your estate planning goals are achieved while preserving your wealth for future generations.
Strategy, Tax
Worldwide Disclosure Facility
Strategy, Tax
If you need to disclose offshore tax issues to HMRC, Eastfield Accountants is here to help. We can guide you through the Worldwide Disclosure Facility, ensuring your disclosures are accurate and compliant. Contact us today for professional advice.
Strategy, Tax
Capital Gains Tax Advice
Strategy, Tax
Obtain valuable insights and expert guidance on Capital Gains Tax (CGT) with our dedicated advisory services. We offer comprehensive assessments and tailored advice to help you minimise tax liabilities and maximise your returns. Trust us to provide reliable and approachable CGT advice, ensuring you make informed financial decisions for optimal outcomes.
Strategy, Tax
Corporate Tax Planning
Strategy, Tax
Optimise your corporate tax position with our expert planning services. We provide tailored strategies to minimise tax liabilities, maximise deductions, and enhance overall tax efficiency for your business. Trust us to deliver comprehensive and effective corporate tax planning solutions, helping you achieve your financial goals.
Strategy, Tax
Trust Tax Returns
Strategy, Tax
Ensure compliance and accuracy with our comprehensive trust tax return services. We understand the unique tax requirements and regulations related to trusts and will handle your tax return preparation meticulously. Trust us to manage your trust tax returns with precision, allowing you to meet your obligations and maintain trust compliance efficiently. Focus on managing your trust while we take care of the tax compliance process.
Tax
Self Assessment Tax Returns
Tax
Effortlessly navigate the self-assessment process with our reliable services. We ensure accurate submissions and maximise your tax savings. Trust us to handle your self-assessment tax returns, providing peace of mind and efficient compliance.