Are you a high earner? Then being alert to certain aspects of your tax planning regime could save you a substantial sum. From next (tax) year, April 2010, new rules come into effect that you should be aware of.
As of next April, if your salary is over £100,000, then you may wish to consider that you face a gradual loss of your Personal Tax Allowance, which is the portion of your salary the Revenue allows you to earn tax-free.
This happens at a fixed rate. For every £2 of income you have above the £100,000 threshold, you will lose £1 of personal allowance.
Effectively, your personal allowance will have disappeared completely if your salary exceeds £114,000.
In this case, you may wish to opt for a voluntary cut in wages. You can achieve this by making a contribution to your pension scheme. If this lowers your income to the £100,000 level, it is an efficient way to preserve your personal allowance.
Diverting funds into your pension in this way will give you effective tax relief of 60%.
Another option would be to reduce your taxable income by making a contribution to charity.
