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Hi there,
Could you help me understand why the ‘effective’ rate of interest is quoted as being 60% for ANI between £100000-£123700 in the BPP textbook.
thanks
For every £2 of additional net income above £100,000 and up to £123,700, the PA will decrease by £1.
Therefore the taxable income will increase by £3
The additional £3 of taxable income will then be taxed at 40% = £1.20
So £1.20 tax is effectively charged for every £2 of actual additional income in this band – £1.20 on £2 = an effective 60% rate
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