Answer: This change is due to come in on 6^th April 2010 – unless we have a change of government before that and due to improving economic conditions, they withdraw this.

There are two factors here. The first is the personal allowance which provides an amount of tax free income. This will be gradually eliminated where a person’s total ‘adjusted net income’ is more than £100,000 by reducing the allowance by £1 for every £2 that the income limit is exceeded. Therefore, if the adjusted net income is £105,000, this exceeds the £100,000 limit by £5,000 and £2,500 of personal allowance would be lost. If the personal allowance next year is £6,475, then on incomes over £112,950, the whole of the personal allowance will be lost.

The second factor is that if an individual’s taxable profit is over £150,000, the part of it which is over £150,000 will be taxed at 50%.

So what can you do about it? There are ways you can plan to shelter yourself from this higher rate of tax. This is not helped by the fact that the Government has put legislation in place which substantially reduces the amount you can pay into pensions and get tax relief on.