Ndubuisi Egwim explains the UK's 60% tax trap: earn over £100,000 and you lose your personal allowance at a rate that creates an effective tax rate near 60%. He shows how extra pension contributions can reduce your taxable income and avoid it.
£100,000
£12,570
£1 lost for every £2 earned above £100,000
Approximately £125,140
Make additional pension contributions
Number five falling into the 60% tax trap now. I've been speaking about this for over a year now. Or if your adjusted net income process a certain amount £100,000, you start losing your tax free allowance of £12,570. That means that for every extra £2 you earn above that 100,000, you lose £1 from your tax free allowance and you'll be paid an expected tax rate of 60% by the time you hit 125140. That's the magic number. You've lost all your tax free allowance and paying an effective rate of 60% again. A few things you can do is to consider reducing your taxable income by making additional pension contributions. I've done a free guide explaining all about how to avoid the 60% tax drop and it's very popular. It's been downloaded by thousands of doctors and healthcare professionals. If you want it, just comment in the comment section and request it. I will share the link or check the description to download it for free. That can help you through the process. And of course, if you have any questions around how to avoid 60% tax drop, I'm more than happy to answer them in the comments.
