Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,000 or above.

You’ll also need to do a Self Assessment tax return.

You will find further restrictions applied to high earners concerning the allowed pension contributions per year. The highest that any person can contribute to pensions (both office and private pensions united ) is £40,000 per year. However, when your earnings annually are far more than £110,000 per year (after any private retirement contributions have been taken into account), then your annual retirement allowance can start to be restricted and will require careful calculation to ascertain your actual private allowance which may vary year on year. If you or your employer contributes more to a pension program that your yearly allowance then there's an additional tax charge imposed by HMRC.

Do you earn over £100k?

Reduction of the personal allowance

Not all taxpayers are able to benefit from the personal allowance – once income exceeds £100,000 the allowance is gradually reduced until it is eliminated in full. However, there are steps which can be taken to reduce income and preserve entitlement to the personal allowance.

The personal allowance is set at £11,850 for 2018/19, rising to £12,500 for 2019/20.

When is it abated?

Once an individual’s ‘adjusted net income’ exceeds £100,000, their personal allowance is reduced by £1 for every £2 by which ‘adjusted net income’ exceeds £100,000.
The measure of income for these purposes is ‘adjusted net income’. This is an individual’s total taxable income before personal allowances and after deducting certain reliefs, such as:

  • relief for trading losses;
  • donations to charity through the Gift Aid scheme (deduct the grossed-up amount of the donation); and
  • pension contributions (deduct the gross amount).
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