George Hardey, tax expert at Waltons Clark Whitehill
George Hardey

Higher earners face being caught in tax ‘trap’

Waltons Clark Whitehill, the North East firm of chartered accountants and business advisors, is encouraging people on high incomes to assess their finances in light of an increasingly hazardous tax ?trap?.

Despite narrowly avoiding a triple-dip recession, March?s Budget outlined the UK?s fragile economic state. Consequently a sustained period of belt-tightening remains in place, with a number of finance raising techniques being introduced by the Government.

In a move to increase the taxation of higher earners, the treasury continues to implement a gradual reduction in the personal allowance if your taxable income exceeds £100,000. This comes as a result of a reduction of £1 allowance for every £2 of excess taxable income. This has become more commonly known as the ?Personal Allowance Trap?.

For 2013/14 the trap potentially applies to even more taxpayers with the increase in personal allowance to £9,440:

Taxable income Marginal rate

£100,000 to £118,880 60%

£118,881 to £149,999 40%

£150,000 + 45%

For 2014/15 the trap is even wider with the increase in personal allowance to £10,000:

Taxable income Marginal rate

£100,000 to £120,000 60%

£120,001 to £149,999 40%

£150,000 + 45%

George Hardey, tax expert at Waltons Clark Whitehill, said: ?The personal allowance trap affects around 700,000 people in the UK. If you think you could fall within this trap we can advise you of all possible ways of keeping well clear. The best first step is always to take professional advice.?

www.waltonscw.co.uk

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