Do you want to earn just over £100k?

25 September 2023

Because of the relative changes in Employment income and personal allowances, the short answer is NO, let me explain…

This article is targeted at those with employment income of £99,000 and above, because if you go over the £100,000 income level there is a painful change in your tax status that might make you want to reconsider. Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above. So, between these two levels of earning your effective tax rate is 60%, Ouch

You will also need to do a Self-Assessment tax return. If you do not usually send a tax return, you need to register by 5 October following the tax year you had the income.

HMRC (HM Revenue and Customs) requires anyone who earns over £100k during one tax year to fill in a SA100 tax return form. Because they want to check that people earning over £100k are repaying their personal allowance – known as the personal allowance restriction.

Current Income Tax rates and bands January 2023

Earnings Rate
0 to £12,570 Personal allowance: no income tax payable
£12,501 to £50,270 Basic rate: 20%
£50,001 to £150,000 Higher rate: 40%
Over £150,000 Additional rate: 45%

You do not get a Personal Allowance on taxable income over £125,140, By losing the allowance, it adds an extra 20% of tax onto the income you earn between £100,000 and £125,000.

What are the alternatives?

Reduce Employment income and maintain your personal allowances

Instead of your pay rise, take non-cash employee benefits such as a company car, private health insurance etc. paid for through salary sacrifice

Increase your pension contributions.

If your income is made up of other income, such as property or dividend income from investments, consider transferring these assets to a lower earning spouse or partners

Donate to charity and claim the Gift Aid tax relief.

Look for tax efficient investments. SEIS (Seed Enterprise Investment Scheme), EIS, VCT

Make sure you’re claiming for all allowable costs, professional subscriptions, etc

Get some advice from a good accountant

You may also be interested in this: Common Mistakes With Self-Assessment Tax Return – Maple Accountants

Income Tax rates and Personal Allowances : Income over £100,000 – GOV.UK (www.gov.uk)

How to save business tax – Maple Accountants

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