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tax return threshold for high earners

What is the Tax Return Threshold for High Earners?

19/09/2024tax

What is the tax return threshold for high earners? If you’re a high-earner in the UK, the daunting tax system of the UK might haunt you for many reasons. But you’re not alone in this as we’ve got you covered. It’s also essential to have an understanding of the UK tax obligations to deal with allowances, reliefs, and income sources. 

The recent changes in this regard are making the high earners in the UK worried. This is because the recent threshold in this regard has gone from  £100,000 to £150,000 recently. This might make you wonder how to file the tax return with recent changes or how it might affect the high earners in the UK in future. Your overall financial situation can be changed with this update. So let’s dive into the discussion to have a better insight into the UK tax system and its challenges. 

Our team of professional members loves to hear out your business problems and find out the possible and suitable solutions quickly to the reporting in the UK. Contact us now.

Did the Tax Return Threshold Change for High Earners?

Here is an explanation in this regard.

Previous Threshold

Just before the recent update, the high earners were the individuals who go up the scale of £100,000 in the UK and navigate the complexities of the UK tax system. This belongs to the tax year 2022/23 and the previous years as well. Employees as well as self-employed people are part of this threshold. If their income is more than the mentioned threshold the tax returns will have to be submitted as a high earner. 

In the previous years, the old bracket of the threshold in this regard in criticised as it was too low to be a high earner with this income bracket. The tax affairs of such people were not as complex. Unnecessary administrative burdens and the cost of handling the affairs were high as well. The recent update is meant to simplify the affairs and this will also reduce the people who have to deal with the complexity of the tax return and such relevant burdens in the UK.

New Threshold

In the recent tax years 2023 and 2024, the threshold for navigating tax returns is updated. The current figure turned out to be £150,000. The burden of cost and administrative burden is automatically reduced after catering to deal with in the recent bracket of the threshold. Individuals earning below this threshold are no longer obliged to handle the tax returns anymore. 

The process will be a bit more streamlined for these individuals. This will include less paperwork and fewer forms to fill out as well.

1. Important Exceptions

While the new threshold provides relief for many, some individuals may still need to file a tax return. Including those with:

  1. Settlement and trust income
  2. Liabilities of capital gains tax
  3. Claims of tax relief
  4. Complexity of handling tax obligations

2. Implications for High Earners

As the number of people is less in number with this recent update, this will ensure that time and effort are saved for the individuals who do not belong to the category of high earners. However, those who are under the category of high earners need to review their circumstances. This will help to ensure they’re meeting their tax obligations.

For the high earners, it is suggested that they must review the changes with the new circumstances. By understanding the basics of the change and how to implement the new version, individuals will have to deal with less number of errors and the tax strategy will be optimised.

Additional Factors to Consider

There are income sources for high earners to consider in this regard. This includes:

  1. Savings income
  2. Dividend income
  3. Rental income
  4. Foreign Income

Sometimes having income below the required threshold may also end up paying for the tax returns and handling the complex obligations in this regard though.

1. Tax Relief Claims

The consideration of tax relief and claims is also important. Just Like

  1. Donations of the charity
  2. Contribution of the pension
  3. The relief of the Enterprise Investment Scheme
  4. Tax credits for Research and Development

This will further help to reduce the liability of tax.

2. Complex Tax Affairs

In case of having the complex sources, including

  1. Multiple sources of income
  2. Foreign income or assets
  3. Trusts or settlements
  4. Capital gains tax liabilities

You can seek advice from relevant professionals. This will ensure that all the tax requirements and obligations are met well. You’ll also optimise your strategy of tax.

3. Changes in Circumstances

If there are any noticeable changes in the circumstances, the high earners must inform HMRC. This includes

  1. Marriage or civil partnership
  2. Divorce or separation
  3. Children leaving home
  4. Changes in employment or self-employment status

The Bottom Line

In conclusion, with the recent change of high earners threshold, which is an increase from the limit of £100,000 to £150,000. The tax system in the UK will be simplified with this change. This will help reduce the administrative burden for the people who do not belong to the category of high earners in the UK. However, the people who are still considered to be the high earners must follow up and review their practices.

This will help to ensure that the less number of errors are made. Moreover, the change in threshold offers relief for some. It’s important to review the special circumstances of every individual to have an idea of whether or not to go for a tax return this tax year. The complexity of high earners with tax obligations will be handled well by being informed. This will ensure that the right amount of tax is being paid and the hard-earned money is spent well.

Reach out to one of our professionals to get to know about the tax return threshold for high earners in the UK. Get in touch and you will be provided instant professional help!

Disclaimer: The information about the tax return threshold for high earners in the UK provided in this blog includes text and graphics of a general nature. It does not intend to disregard any of the professional advice.

 

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