If you are that one individual in the UK who is earning more than the limit of figure £100k, the first benefit that you will tend to lose will be the perks like a personal allowance. You must be well aware of the tax implications of earning over £100K. The dreaded tax rate will be raised up to 60%. This explains that the tax-free amount of personal allowance £12,570 will no more be entertained to you by the government. The most imperative thing to remember here is that you will have to do your tax returns as well. However, the adjusted net income will still be there and it will be the job of HMRC  to look into this matter for you. Moreover, this will totally depend on the amount of your income that will help to decide how to do the work with the money you owe to HMRC.

Reach out to our smart and clever-minded guys to get an understanding of the tax implications of earning over £100K. We will help to understand your queries instantly.

How Does the Rate Work in the UK?

It is a query of several people that how the tax rate of a person is justified for a certain level of income. Well to get clarity of mind in this regard, it is better to gather the basic information about how income is taxed and how the tax system works in the UK. Currently, there has been a change observed in income tax.

This change is dependent on the Autumn budget as well as the Chancellor’s vision. According to this, the tax rate will be 0 percent of your income is till the limit of personal allowance amount which is £12,570. The basic rate of 20 percent will be implemented if you are earning the limit of £12,571 to £50,270. The higher tax rate which is 40 percent will be implemented if you are earning between the limit of £50,271 to £125,140. And an additional tax rate that is 45 percent will be implemented if you are earning more than the figure £125,141 in the UK.

Moreover, when we talk about the tax rate of percent, this is not yet recognised by HMRC. This is why it is not mostly mentioned in the tax rate tables. This is known to be an unofficial tax rate as yet.

Example of Tax Rate Implementation in the UK

Here is a simple and easy example to explain the tax rate that is unofficial and unrecognised by HMRC but still exists. Let us take the instance of an individual who is earning £100,000, there is a pay raise of an amount £1,000. The raise will be taxed at the higher tax rate which is 40 percent. However, if you are earning more than this, you will list the amount of your personal allowance.

Alternatives to the Tax Implications of Earning Over £100k

If you are liable to pay the income tax in there is normally no escape and you will have to pay it in order to follow the tax law. However, there are possible ways to be tax efficient. In the following, here are listed possible ways to increase your tax efficiency in the trap of a tax rate that is 60 percent of your earning more than a certain limit.

1. You must seek investments that are efficient for your tax matters.
2. You must donate to charitable organisations and then claim the gift aid relief for tax.
3. You must invest more in pension contributions.
4. You must take the non-cash employee benefits to make the most out of it. An employee company car is one such example. Private health insurance is also a good idea. This can be done through the scheme of salary sacrifice.

The Bottom Line

Now that you have gathered a fair amount of information about the tax implications of earning over £100K, we can bring the discussion towards wrapping up. If you are earning a certain limit, the tax implementation will work accordingly for you. The tax rate of earning more than the additional rate limit is not even recognised or officially approved by HMRC. However, you will still have to be considerate about it. This will keep you protected from unfavourable circumstances in the UK. We hope these few minutes of reading will help you to develop a better understanding of the facts related to tax implications of earning over £100K in the UK.

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Disclaimer: The information about the tax implications of earning over £100k provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.