Personal allowances - withdrawal for those earning £100k or more
The measure
Currently, the income tax-free personal allowance is available to UK residents (and non-residents who are Commonwealth citizens) regardless of the level of income.
From 2010/2011, the personal allowance will be phased out where 'adjusted net income' (taxable income less allowable pension contributions, trading losses and gift aid payments) exceeds £100,000. The allowance will be reduced by £1 for every £2 of income above the threshold, with a complete phase out occurring when income levels reach £112,950. The phase out rules will introduce a 60% effective rate of tax for income between £100,000 and £112,950.
Who will be affected?
Individuals receiving taxable income of more than £100,000.
When
The measure is effective from 6 April 2010.
The loss of the personal allowance for those earning more than £100,000, combined with the increase in the top rate of income tax, and the withdrawal of higher rate tax relief on pension contributions, makes the UK an increasingly expensive place for high earners to live.
The changes represent an extension and acceleration of the announcement made by the Chancellor in the Pre-Budget Report last November, at which time it was anticipated that the withdrawal would occur in two stages, with full phase out not triggered until income reached £146,480, and would not take effect until 2011/12.
