Avoiding the 60% tax rate

You will not see the 60% tax rate in any official literature, but this is the effective income tax rate for anyone with taxable income of more than £100,000 as the personal allowance is lost to the extent of £1 for every £2 by which their income exceeds £100,000.

There are two key routes to steer clear of the 60% rate – reduce income or increase allowances. The former would mean that, especially if your income fluctuates, you might defer income from one year until the next.

There is limited scope for increasing allowances, but pension premiums – which score for 20% immediate relief on payments and the balance through self-assessment – would be effective.