High earners told to plan now to avoid tax hits
HIGH earners may be able to avoid the effects of next year s tax changes through proactive planning say a firm of Huntingdon chartered accountants. Thinking now about the impact of the changes could pay dividends when they come into force, according to Si
HIGH earners may be able to avoid the effects of next year's tax changes through proactive planning say a firm of Huntingdon chartered accountants.
Thinking now about the impact of the changes could pay dividends when they come into force, according to Simon Laskey of Haines Watts.
"The tax changes are a little confusing - some are already in place, others will take effect in future years, some have been brought forward and others have changed since the Chancellor made his original announcements," he said.
"One thing that is clear though is that from April 2010 anyone earning above �100,000 will see some big changes."
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For 2010-11, the personal allowance will be subject to an income limit of �100,000. An individual's personal allowance will be reduced by �1 for every �2 of adjusted net income above the income limit.
Mr Laskey also warned it is still possible the personal allowance will be reduced to nil at this earnings level, instead of the proposed two-stage reduction announced in 2008. From 6 April 2010, a new 50 per cent rate of income tax will be introduced for taxable income above �150,000.
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A new rate of 42.5 per cent, to be introduced for dividends which fall into the income band above �150,000, will also have a significant impact on many owner-managed businesses which trade as limited companies according to Mr Laskey.
The changes could mean that someone earning �200,000 is likely to see their tax bill rise from �69,930 to 77,520. High earners will also be hit by increases in the rates of class one and four national insurance contributions of 0.5 per cent and the removal of higher rate relief on pension contributions.
"Anyone who is going to be affected by these tax changes should be seriously thinking about some proactive planning now" said Mr Laskey.
"This could be as simple as making the most of the current regime before April 2010, or as complicated as a total restructure of business and trading operations.
"Either way, for high income earners now is the time to take action.
INFORMATION: Contact Simon Laskey on 01480 434609 or firstname.lastname@example.org.