Income tax: Erosion of Personal Allowance for incomes over £100k

[jj78]

Hi,

I just found out that the HMRC Personal Allowance gets reduced by £1 for each additional £2 of income over £100k until you end up with a Personal Allowance of zero for earnings over £122k:

https://www.ft.com/content/622ff86c-...1-c5e23ef99c77

https://www.gov.uk/income-tax-rates/income-over-100000


Scenario:

Your income will end up in that bracket if you max out your dividend. You tell your accountant that you may not work a full year the next year, and therefore may want to retain some profits into the next FY rather than maxing out your dividend, if that works out better for tax.

My question is, would you expect your accountant to tell you about this £100k "tax bracket" before finalising the YE accounts and personal tax return?

Thanks.

[BR14]

Hi,

I just found out that the HMRC Personal Allowance gets reduced by £1 for each additional £2 of income over £100k until you end up with a Personal Allowance of zero for earnings over £122k:

https://www.ft.com/content/622ff86c-...1-c5e23ef99c77

https://www.gov.uk/income-tax-rates/income-over-100000


Scenario:

Your income will end up in that bracket if you max out your dividend. You tell your accountant that you may not work a full year the next year, and therefore may want to retain some profits into the next FY rather than maxing out your dividend, if that works out better for tax.

My question is, would you expect your accountant to tell you about this £100k "tax bracket" before finalising the YE accounts and personal tax return?

Thanks.

Where have you been FFS?

[jj78]

Where have you been FFS?

Helpful replies only please! I'm new to earning that amount of money!

[BR14]

Helpful replies only please! I'm new to earning that amount of money!

Welcome to the top tax brackets

[MrButton]

Your question is confusing.but I’ll attempt an answer.

If I was approaching 100k then yes I would expect my accountant to mention this. Even though I know about it and so should you if you planned your remuneration.

However it depends on the accountant/package I know some are less proactive than others.

[jamesbrown]

Helpful replies only please! I'm new to earning that amount of money!

Earn less.

[northernladuk]

Earn less.

Come April 2019 they will

[jj78]

If I was approaching 100k then yes I would expect my accountant to mention this. Even though I know about it and so should you if you planned your remuneration.

However it depends on the accountant/package I know some are less proactive than others.

Thanks for your answer. That's one vote for "yes, your accountant should have told you".

Anyone else got a view, please?


My accountant was well aware that I did not have much knowledge or understanding of tax thresholds and allowances. I specifically asked him to advise on this. He told me about the dividend tax bands at £43k and at £150k, but no mention of the £100k, which was far more relevant for me than the £150k threshold.

His letter of engagement includes the provision of tax advice.

[Lance]

Income tax: Erosion of Personal Allowance for incomes over £100k

When I was getting close in the tax year before they massively upped the dividen tax, my accountant told me not to exceed 100k. If you’re doing it now you’ve got 2 things to challenge the accountant as there’s simply no good reason to take that money unless you need it. 32.5% dividend tax........

You could turn some if into a loan and pay it back if that helps. Unless it’s TY 16/17 as you’re too late for that.

[jj78]

When I was getting close in the tax year before they massively upped the dividen tax, my accountant told me not to exceed 100k. If you’re doing it now you’ve got 2 things to challenge the accountant as there’s simply no good reason to take that money unless you need it. 32.5% dividend tax........

You could turn some if into a loan and pay it back if that helps. Unless it’s TY 16/17 as you’re too late for that.

Thanks Lance. Unfortunately, it was for TY 16/17. I specifically told the accountant that I may not want to take a full dividend that year if it worked out more tax efficient, and asked him to advise on that.

I think my next step is to write a letter of complaint asking the firm to put their insurers on notice to expect a claim for professional negligence, for failing to follow my instructions and failing to exercise reasonable care in the performance of his duties.