6 ISSUES FOR JUST £6 Subscribe to Essex Life today CLICK HERE

Adam Aiken asks how rises in taxation may impact on your income

13:01 18 March 2011

Adam Aiken asks how rises in taxation may impact on your income

Adam Aiken asks how rises in taxation may impact on your income

As the Government looks to bring down the deficit, cut backs in spending is only half the answer. Adam Aiken asks how rises in taxation may impact on your income


It has always been sensible for high earners to protect as much of their income as possible from the taxman, but it is now proving to be more important than ever.


Changes to income tax, national insurance and VAT mean that an increasing amount of what we earn and spend is going straight into the treasurys coffers.


The so-called marginal rate of tax refers to the highest rate of income tax we are liable for. So someone earning between 6,475 and 37,400 has a marginal rate of 20%, while someone earning between 37,401 and 150,000 has a marginal rate of 40% and someone earning more than that has a marginal rate of 50%.


But adding the effects of national insurance and VAT to the equation has led experts to calculate that some high earners are set to have an effective marginal rate of nearly 70% thanks to the latest tax changes, while even basic rate taxpayers face giving more than 40% of their income to the Government for every 1 they earn above their tax-free allowance.


Asset management firm Fidelity International has worked out that national insurance and VAT help push the effective marginal rate to 43% for basic rate payers, 51% for people earning more than 37,400, and 60% for those on more than 150,000.


But thats not all. Because the personal allowance is withdrawn for people who earn more than 100,000, Fidelity estimates that anyone earning just over that amount will have an effective marginal rate of 68%. In other words, for every extra 1 these people earn and spend, 68p will be swallowed up in income tax, national insurance and VAT.


Rob Fisher, head of UK personal investments at Fidelity International, said: These figures will prove quite shocking to many of us. The amount we are now paying in taxes is really significant and people must ensure they take advantage of every tax break available to them.
The good news is that it is often possible to plan ahead to avoid these high rates.


If you are a high earner and youve never taken advice or if you havent had any advice in the past few years you would do well to contact an accountant to see if you can reduce your tax liabilities and one of the most effective ways to reduce a marginal rate is via higher pension contributions, which attract tax relief.


Other methods include married couples and people in civil partnerships making sure that income from savings, shares and property goes to the spouse or partner who has the lower marginal rate.

Find out more
For more personal finance news or advice, visit www.mymoney24.co.uk

0 comments

Shop with us at Great British Life

More from People

Yesterday, 09:00
Yvette Ankrah: CEO of The Kitchen Table

As well as being CEO of The Kitchen Table, Yvette Ankrah is a business and marketing coach and mentor. Here she shares five of her favourite things about Essex

Read more
Wednesday, February 3, 2016
Mike Edmonds on the set of Time Bandits

Southend’s Mike Edmonds is one of the world’s most secret movie stars. Having featured in the original Star Wars trilogy, Harry Potter and on stage with the RSC, Mike’s life is set to be the subject of a new film, sharing the secrets of his success. Words by Sylvia Kent

Read more
Wednesday, January 27, 2016
'Sgt William McWhiney took the wounded man on his back and carried him to sanctuary'

As we approach the 160th anniversary of the end of the Crimean War, Stephen Roberts shares the tales of some Essex heroes involved in this conflict and explains the impact it had on our county

Read more
Wednesday, January 27, 2016
David Whiteley

In his new monthly column for Essex Life, BBC presenter and director David Whiteley shares his insightful view on stories from across the county of Essex

Read more
Tuesday, January 19, 2016
Neil Watson in his element

EL hears about Neil Watson’s first novel and how he was inspired to write this story

Read more
Monday, January 18, 2016
Heartthrob Jeff Brazier

He’s the Harlow heartthrob who charmed the ‘noughties’ generation of celebrity culture in Britain, but there is a lot more to Jeff Brazier than his cheeky grin and good looks. The presenter of This Morning opens up about family, being the best father he can and a dedication to life coaching born out of painful setbacks in his own life. Karen Anne Overton finds out more

Read more
Tuesday, January 12, 2016
HG Wells c. 1910

We found out what it is about Essex that has inspired writers such as HG Wells and many more.

Read more
Tuesday, November 24, 2015
Great Baddow

A prolific artist, specialising in watercolour and capturing some of the county’s most beautiful scenes, Alfred Bennett-Bamford left a lasting legacy for the county. Hannah Salisbury from the Essex Record Office tells his story

Read more
Monday, November 16, 2015
Paul Taylor

As headmaster of Framlingham College, former cricketer Paul Taylor is committed to hitting the ‘league table culture’ for six, writes Nicky Adams

Read more
Tuesday, November 10, 2015
Maggie Smith

Dame Maggie Smith’s triumphant career spans six decades and multiple genres, and with two Academy Awards under her belt, the Ilford-born actress has worked hard for her successful career. Camilla Davies speaks to the national treasure about her own story

Read more

Topics of Interest

Food and Drink Directory

Local Business Directory

Essex's trusted business finder

Job search in your local area




Search For a Car In Your Area

Property Search