Personal Allowance Trap


As you may know, there is a nasty tax trap by reference to the gradual withdrawal of the personal allowance if your taxable income exceeds £100,000.This is via a reduction of £1 of allowance for every £2 of excess taxable income.

 

For 2013/14 the trap potentially applies to even more taxpayers with the increase in personal allowance to £9,440:

 

Taxable income

Marginal rate

£100,000 to £118,880

60%

£118,881 to £149,999

40%

£150,000 +

45%

 

For 2014/15 the trap is even wider with the increase in personal allowance to £10,000:

 

Taxable income

Marginal rate

£100,000 to £120,000

60%

£120,001 to £149,999

40%

£150,000 +

45%

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