So we have had the Budget. I am a little surprised that so few of the editorials that I have read have been quite as mild as they have. So let me outline a key point for those with incomes over £100,000. Remember that this is taxable income, not simply earned income – so includes taxable savings income and dividend income.
The personal allowance will reduce by £1 for every £2 over £100,000. The allowance has been frozen at £6,475. In other words with an income of £112,950 the personal allowance is lost entirely. So although the tax rate of 50% does not come into effect until 2011. The new tax year will see the following effective rates of tax.
| Taxable Income | Effective Rate of income tax paid on income above £100,000 |
| £112,950 | 60.00% |
| £120,000 | 52.95% |
| £130,000 | 48.63% |
| £140,000 | 46.67% |
By constantly representing the figures, politicians often end up covering up the real facts of what they propose. The tax position for anyone with an income over £100,000 will mean more tax is paid, significantly more. This excludes other indirect tax increases – such as VAT and Stamp Duty.
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