April 13, 2024

The sneaky tax grab costing top earners £2,500 every year

Financial advice firm NFU Mutual estimates that by 2028, two million people will be earning more than £100,000, with more than 700,000 of them not earning enough (that is, more than £125,140 a year) to escape the 60pc marginal rate.

However, there is a deeper injustice hidden within this tax on aspiration. 

Under Mr Darling’s rule, every £2 earned over £100,000 is taxed at 40pc and then every £1 of the personal allowance reclaimed is also taxed at 40pc. It means for every £2 earned, you pay £1.20 in income tax, or 60pc.

Yet for those earning less than £100,000, the personal allowance is applied to the first £12,570 you earn, and then anything above that is taxed at 20pc – up until your earnings breach the £50,271 higher-rate threshold.

So, why is it that when you earn over £100,000 you are taxed on the personal allowance at a rate of 40p? Surely, when you lose the personal allowance you should be taxed at 20pc? It is, after all, technically the first £12,570 you earn.

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