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Stuck in frozen tax thresholds?

The value of key tax thresholds is being eroded as elements of the income tax system lag behind inflation.
Three key thresholds relating to income tax have been subject to this treatment:
High income child benefit tax charge
This tax charge, introduced in January 2013, claws back child benefit at the rate of 1% for each £100 of income over £50,000 (based on the higher of the two parental incomes). That £50,000 threshold has not changed since its introduction.
Personal allowance tapering
The personal allowance is reduced by £1 for every £2 you earn over £100,000, and has not been revised since it was introduced in 2010.
Additional/Top rate tax starting point
The additional tax rate started in 2010/11 with a threshold of £150,000. Whilst it has since been reduced from 50% to 45% (46% in Scotland), the threshold has not increased.
You can limit the effect of these income-driven thresholds by reducing the income being measured. For example, you may be able to transfer investments to your spouse or civil partner, or use personal pension contributions to reduce your income for tax purposes.
ISAs and some other investment products can also shelter your income and prevent it counting towards thresholds.
As it is still reasonably early in the tax year, there is more scope for reducing the effect of these freezes in 2018/19, with professional advice. Please contact Matthew Bromley, Chartered Financial Planner at Cowgills Wealth Management for further advice or to discuss your situation.
Levels and bases of taxation and tax reliefs are subject to change and their value depends on individual circumstances. The Financial Conduct Authority does not regulate tax advice.

This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.


The information was correct at time of publishing but may now be out of date.

Posted by Cowgills
3rd July, 2018
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