Earn £100,000? You could be paying 60% income tax without knowing it
People who earn between £100,000 and £125,000 pay income tax at a rate of 60% because of government “stealth” tax policies, warns The Telegraph.
These earners are only meant to pay income tax at a rate of 40%. However, for every £1 they earn above £100,000, they lose 50p of their Personal Allowance. This is a costly trap that makes their earnings subject to higher tax rates.
Sean McCann, who works at NFU Mutual advisers, tells the newspaper: “While the top rate of income tax is headlined as 45%, for a growing number of taxpayers it’s significantly higher.
“With this group keeping only £38 from every £100 on the top proportion of their earnings, they are paying one of the highest tax rates in Europe.”
For taxpayers in this bracket, pension planning can be highly beneficial.
How culture shapes our money mentality
How human behaviour affects our relationship with money is one of the topics of conversation in the Financial Times.
Researchers from consultancy ReD have discovered what we all know which is that many have a contradictory attitude towards money.
One person the article looked at was Alice, a 28-year-old from London. She spends a lot of money on nights out, but also transferred money to her parents for safekeeping each month. She also views her pension as a backup plan but admits to not trusting it.
To explain such ‘weird’ behaviour the researchers looked at the type of cultural patterns that are studied in anthropology. They are convinced that doing so will help savers make sense of modern money. While it is important what people say about their money and spending habits, the researchers suggest, it is also important to consider what they do not say.
This is where getting a plan for your money can help. Letting someone objectively appraise your financial situation should reduce the chances of illogical decisions being made.
We lost 90% of our nest eggs backing Osborne’s budget boost for start-ups
This article in the Times looks at those who invested in Enterprise Investment Schemes. This was and is a government-backed initiative offering tax reliefs to investors who buy new shares in qualifying companies.
A decade the story coves an investor who lost £60,000 by investing in such a scheme. He is obviously not happy with this and vents his frustrations in the article.
We have a saying which is you should not let the tax tail wag the investment dog. Whilst these investments offer investors tax breaks, they are sometimes bad investments and are only suitable for experienced investors.