Reduction of personal allowance - high income individuals

Aacca1311y ago

Hi, Could you please explain this to me? ''The effective rate of tax on income between £100000 - £120000 is therefore 60%. This is made up of: -higher rate income tax =40% - lost Personal allowance (1/2 × 40%)"

TTTax Tutor11y ago#1

£2 of income in that band will be taxed at 40% giving £0.80 in tax, but for every £2 of income the taxpayer will lose £1 of personal allowance which therefore adds in another £1 of taxable income again taxed at 40% giving an additional £0.40 in tax. The total tax on that £2 of income is therefore £0.80 + £0.40 = £1.20 which is 60% of that income.