Andy Egwim explains why UK doctors earning over £100,000 get a brown envelope from HMRC. Once income hits that threshold, the personal allowance shrinks by £1 for every £2 earned, pushing the marginal tax rate from 40% to 60%. A £200,000 salary can mean an effective tax rate of 45% to 60% without any pay rise.
What, uh, in order to compensate, HMRC will just bring down— what will happen is you're already paying 40% tax. Yes, 200,000 or the— I don't remember the limit. It's like 40%.
Yeah, about 50,271. You're very close.
So you're already paying the 40% tax and now you're above 100,000. What happens is that your tax-free allowance, 12,571. Actually keeps decreasing one by one, little by little by little. Then that's when you get the brown envelope saying your tax code has changed. So whenever your tax code has changed, it means that your free allowance has decreased, which means you're already getting into the trap, you're creeping into it. The tax code keeps changing with that, isn't it? So, and they keep changing the tax code to make sure that you're still having a little bit of allowance, and then, but then you're paying like 45%, and then 50, and then At one point, when it's more than 100,000, you're gone, like 60%.
For a doctor consultant listening to this now, even, even a nurse or pharmacist who find themselves in that situation, what would you say for them to do?
