Apparently, over half a million taxpayers paid a marginal tax rate of 60% in 2022/23!
This 60% tax rate does not appear in tax tables though. For 2024/25 taxpayers in England, the rates shown on the HMRC website are:
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,570 to £50,270 | 20% |
| Higher rate | £50,270 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
So where does the 60% rate come from? This is down to the personal allowance of £12,57
0 gradually being eroded away at the rate of £1 for every £2 of income over £100,000, so that at £125,140 and above there is no personal allowance available.
There are legitimate ways around this with effective 60% tax savings. Payments under gift aid should be recorded and claimed, and pension contributions and salary sacrifice are also effective methods of reducing income. Planning can also be undertaken to reduce other income such as interest or dividends – passing assets to the spouse or tax-free ISAs are just two.
If you think you may fall into this “trap” this tax year (by 5 April 2025) talk to us now. It is far easier to plan in year rather than after the tax year has ended when there is very limited scope.
Give us a call today to find out how we can help you implement efficient payment systems!
