Navigating the complexities of UK taxation becomes increasingly intricate as your income rises. Recent changes by HMRC, particularly affecting high earners, have added new layers to an already complex landscape. At Dead Simple Accounting, we’re here to bring clarity and peace of mind to high earners navigating these choppy waters.
Recent Changes for High Earners: A Brief Overview
In May 2023, HMRC announced a significant change impacting high earners. Previously, anyone with a salary (PAYE) exceeding £100,000 had to file a tax return. Now, from the 2023/24 tax year, this threshold has been raised to £150,000. It’s a change that may have slipped under your radar, but it’s an important one.
Understanding the Personal Allowance Taper
For many, the concept of losing the personal allowance as income increases is not widely known. Here’s a quick rundown:
- The Personal Allowance: In the 2023/24 tax year, this is £12,570 – the portion of your income that is tax-free.
- Earning Over £100k: Once you exceed £100,000 in earnings, your personal allowance reduces by £1 for every £2 over this threshold. So, at £125,140, you lose it entirely.
- Tax Implications: When you start losing your personal allowance, the additional income not only gets taxed at the usual rates but effectively faces a 60% rate due to the loss of tax-free income.
Why File a Tax Return?
High earners face a taxing paradox. The interplay of multiple tax rates and the gradual loss of the personal allowance means that getting your taxes right is more complex than it appears. A tax return ensures that your tax affairs are in order, and you’re not left owing HMRC unexpectedly.
Who Needs to File Now?
With the new £150k threshold, filing a tax return is necessary for those whose total income – including salary, self-employment, property, or investment income – crosses this limit. The need to file hinges not just on your PAYE income but on your overall income composition.
What is Your Adjusted Net Income?
Adjusted net income is essentially your total taxable income, taking into account various allowances and reliefs. For high earners, ensuring that this figure is accurately reported is crucial. It influences not only your tax liability but also the correctness of your tax code.
Why Use Dead Simple Accounting?
At Dead Simple Accounting, we offer bespoke accounting services tailored for high earners. With our expertise, you can navigate the complexities of your tax obligations with ease. Our pricing is straightforward and transparent, starting at £275 inclusive of VAT for self-assessment tax returns.
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For high earners, accurate tax filing is not just about compliance; it’s about financial efficiency and peace of mind. If you’re unsure about your tax position or need assistance with the latest HMRC changes, contact us. Let’s ensure your taxes are as well-managed as your income.