What is the £100k income ‘cliff-edge’?
Source: The Guardian ·
The tax-free personal allowance starts to be taken away when you hit six figures, and in England you lose access to childcare subsidiesBelieve it or not, there are downsides to earning more than £100,000 a year – particularly if you have small children.“It’s the ambition of many people to reach an income of £100,000, but it does come with an unexpected sting in the tail,” says Sean McCann, a…
From the source
Believe it or not, there are downsides to earning more than £100,000 a year – particularly if you have small children. “It’s the ambition of many people to reach an income of £100,000, but it does come with an unexpected sting in the tail,” says Sean McCann, a chartered financial planner at NFU Mutual. Those who make it into six figures face a 60% tax bill on some income. That is because the tax-free personal allowance starts to be taken away once you earn more than £100,000. For every £2 of income over that, you lose £1 of the £12,570 annual tax-free personal allowance. “This means that any earnings between £100,000 and £125,140 are effectively taxed at 60%,” says McCann. “When you add on the 2% national insurance payable, that means you only keep £38 of every £100 earned.” An estimated 800,000 people are in this position, according to a freedom of information request by NFU Mutual. In England, high earners also lose access to government childcare subsidies once a parent has an…
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