Latest news with #BlickRothenberg
Telegraph
19-05-2025
- Business
- Telegraph
Workers turn down £100k salaries to avoid tax trap
Higher earners are working four-day weeks, stuffing their pensions and taking more holidays to avoid tax 'cliff edges'. New data suggests more workers are deliberately limiting their salary growth in order to avoid tax traps that kick in at certain income thresholds. The number of taxpayers earning just below £100,000 has soared by 60pc in five years to hit 117,000, according to a Freedom of Information request seen by The Times. Meanwhile, the number of taxpayers earning just below the higher-rate tax band of £50,271 has hit nearly one million, an increase of 50pc. Robert Salter, of accountancy firm Blick Rothenberg, said taxpayers were saving more into their pensions while others were reducing their hours by working four-day weeks or taking an extra 10 or 15 days of annual leave per year. He said he had also seen employers providing workers with electric cars as part of a salary sacrifice arrangement. 'Rather than paying someone say £105,000 cash in a tax year, it might be better to offer them a salary of £95,000 and a Tesla or similar e-car.' Economists have warned that cliff edges in the tax system undermine Rachel Reeves's mission to drive economic growth. Even a small pay rise can lead to a significant tax rise or the loss of valuable benefits for workers who cross certain earnings thresholds, thereby incentivising workers to cut their hours or turn down opportunities. For example workers lose their personal allowance of £12,570 at a rate of £1 per every £2 once they earn over £100,000 a year. This creates an effective 60pc tax trap on income of between £100,000 and £125,140. On top of this, parents earning over £100,000 can miss out on thousands of pounds worth of childcare support due to the removal of free childcare. Mr Salter said: 'If you earn £1 above the £100,000 threshold and are presently getting free childcare, you lose that benefit fully – so in effect, it is akin to a 100pc tax charge.'
Yahoo
19-05-2025
- Business
- Yahoo
Workers turn down £100k salaries to avoid tax trap
Higher earners are working four-day weeks, stuffing their pensions and taking more holidays to avoid tax 'cliff edges'. New data suggests more workers are deliberately limiting their salary growth in order to avoid tax traps that kick in at certain income thresholds. The number of taxpayers earning just below £100,000 has soared by 60pc in five years to hit 117,000, according to a Freedom of Information request seen by The Times. Meanwhile, the number of taxpayers earning just below the higher-rate tax band of £50,271 has hit nearly one million, an increase of 50pc. Robert Salter, of accountancy firm Blick Rothenberg, said taxpayers were saving more into their pensions while others were reducing their hours by working four-day weeks or taking an extra 10 or 15 days of annual leave per year. He said he had also seen employers providing workers with electric cars as part of a salary sacrifice arrangement. 'Rather than paying someone say £105,000 cash in a tax year, it might be better to offer them a salary of £95,000 and a Tesla or similar e-car.' Economists have warned that cliff edges in the tax system undermine Rachel Reeves's mission to drive economic growth. Even a small pay rise can lead to a significant tax rise or the loss of valuable benefits for workers who cross certain earnings thresholds, thereby incentivising workers to cut their hours or turn down opportunities. For example workers lose their personal allowance of £12,570 at a rate of £1 per every £2 once they earn over £100,000 a year. This creates an effective 60pc tax trap on income of between £100,000 and £125,140. On top of this, parents earning over £100,000 can miss out on thousands of pounds worth of childcare support due to the removal of free childcare. Mr Salter said: 'If you earn £1 above the £100,000 threshold and are presently getting free childcare, you lose that benefit fully – so in effect, it is akin to a 100pc tax charge.' Lucie Spencer, of wealth manager Evelyn Partners, said she regularly spoke to clients about keeping their taxable income below the 40pc, 45pc and 60pc threshold – as well as the £60,000 band at which entitlement to child benefit is gradually eroded. The Government starts to claw back child benefit where one parent earns more than £60,000 before it is then withdrawn completely from £80,000. Ms Spencer said: 'Making additional pension contributions is one option available. You can pay up to £60,000 per year into a pension and can carry forward unused allowances in previous years. She continued: 'Salary sacrifice can also be used to purchase other non-cash benefits such as cycle to work schemes, low emissions cars, or childcare vouchers.' Nimesh Shah, also of accountancy firm Blick Rothenberg, said tax cliff edges had become a bigger problem in recent years due to the freeze on tax thresholds and wage inflation. A phenomenon known as 'fiscal drag' means that four million of workers will be dragged into paying the 40pc or 45pc rate by 2027-2028, according to estimates by the Office for Budget Responsibility. Mr Shah said: 'Earning £100,000 is quite a milestone for someone, but the higher tax burden makes it increasingly less attractive. 'I think there is a sentiment now that frozen thresholds are killing the aspiration of workers.' Rachel Reeves has vowed to end the freeze in 2028 by raising income tax thresholds in line with inflation. But there are growing concerns the Chancellor could be forced to extend the freeze in order to help plug a multibillion-pound hole in the public finances. Sign in to access your portfolio
Bloomberg
14-05-2025
- Business
- Bloomberg
In the City: Could This Tax Overhaul Spark a UK Wealth Exodus?
The UK government's plan to scrap the 'non-dom' tax status—a policy that allowed wealthy foreign residents to avoid taxes on overseas income—was designed to close a loophole and raise billions of pounds in tax revenue. However, according to a new study from the Centre for Economics and Business Research, it might end up costing the economy more than it brings in if just one in four of the 74,000 people affected chooses to leave the country. In this week's episode of In the City, hosts Allegra Stratton and Francine Lacqua sit down with Nimesh Shah, chief executive of Blick Rothenberg, to unpack what's at stake.
Telegraph
14-04-2025
- Business
- Telegraph
Rachel Reeves urged to raise income tax for first time in 50 years
Rachel Reeves should consider raising the basic rate of income tax for the first time in 50 years, the director of the Institute for Fiscal Studies (IFS) has said. Paul Johnson suggested the Chancellor follow in the footsteps of Denis Healey, the former Labour chancellor, and take 'drastic action' by increasing the basic rate of income tax, which is currently 20pc, in her autumn Budget. However, experts warn it would leave workers hundreds of pounds worse off a year. Writing in The Times on Monday, Mr Johnson said: 'If Reeves does find herself in need of more money come the autumn, perhaps she should take a leaf from the book of her distinguished predecessor both as Labour chancellor and as an MP for the city of Leeds: break the 50-year taboo, be honest and transparent in her choice of tax policy, and raise the basic rate of income tax.' Tuesday marks exactly 50 years since Mr Healey raised the basic rate from 33pc to 35pc when faced with surging inflation and high unemployment. In the years since, politicians have moved 'heaven and earth' to avoid raising it, Mr Johnson said. Income tax is the simplest way for the Treasury to bring in large amounts of revenue. A one percentage point increase in the basic rate would raise £8bn, while a two percentage point increase would generate over £16bn, according to calculations by accountancy firm Blick Rothenberg. However, the move is deeply politically unpopular because it would leave millions of workers worse off. A worker on £30,000 would see their annual pay fall by £175 if the rate increased to 21pc and £349 if it rose to 22pc. Meanwhile, a worker earning £50,000 would be worse off by £375 or £749 respectively. As a result, successive Chancellors have only ever reduced the rate since Mr Healey's 1975 Budget. It is currently charged at 20pc on income earned between £12,571 and £50,270. Experts now predict that Ms Reeves will be forced to either increase taxes or cut spending in the autumn Budget to avoid breaking her self-imposed fiscal rules. Britain's tax burden is already soaring to a post-war high, with the income tax bill expected to leap from £260bn in 2024-25 to £310bn in 2027-28. Despite this, some experts think further tax rises are now 'inevitable'. Nimesh Shah, of Blick Rothenberg, said: 'Given the current state of the country's finances, and global events likely to have fully wiped out the Chancellor's fiscal headroom, it appears inevitable that income tax has to increase at the next autumn Budget.' However, he said this was more likely to come in the form of a reversal in the Conservative government's National Insurance cuts. 'For me, a more likely 'win' for the Chancellor would be to reverse the Conservative government's National Insurance cut – citing that this measure was always unsustainable for the country's finances.' Alternatively, the Chancellor could extend the freeze on income tax thresholds. Rather than increasing the rates, the previous Conservative government chose to freeze income tax thresholds for years – generating billions in extra revenue by stealth as rising wages pushed workers into higher tax bands. Laura Suter, of stockbroker AJ Bell, said: 'While Labour made an election promise not to raise taxes on working people, they have already done so by the back door by continuing with the income tax band freeze that started under the Tories.' She added: 'The Chancellor could extend the freeze further into the future if she wanted to continue this boost to taxes – and that's likely to be a more palatable option as it doesn't strictly raise income tax rates and so doesn't break the manifesto promise.'
Yahoo
14-04-2025
- Business
- Yahoo
Rachel Reeves urged to raise income tax for first time in 50 years
Rachel Reeves should consider raising the basic rate of income tax for the first time in 50 years, the director of the Institute for Fiscal Studies (IFS) has said. Paul Johnson suggested the Chancellor follow in the footsteps of Denis Healey, the former Labour chancellor, and take 'drastic action' by increasing the basic rate of income tax, which is currently 20pc, in her autumn Budget. However, experts warn it would leave workers hundreds of pounds worse off a year. Writing in The Times on Monday, Mr Johnson said: 'If Reeves does find herself in need of more money come the autumn, perhaps she should take a leaf from the book of her distinguished predecessor both as Labour chancellor and as an MP for the city of Leeds: break the 50-year taboo, be honest and transparent in her choice of tax policy, and raise the basic rate of income tax.' Tuesday marks exactly 50 years since Mr Healey raised the basic rate from 33pc to 35pc when faced with surging inflation and high unemployment. In the years since, politicians have moved 'heaven and earth' to avoid raising it, Mr Johnson said. Income tax is the simplest way for the Treasury to bring in large amounts of revenue. A one percentage point increase in the basic rate would raise £8bn, while a two percentage point increase would generate over £16bn, according to calculations by accountancy firm Blick Rothenberg. However, the move is deeply politically unpopular because it would leave millions of workers worse off. A worker on £30,000 would see their annual pay fall by £175 if the rate increased to 21pc and £349 if it rose to 22pc. Meanwhile, a worker earning £50,000 would be worse off by £375 or £749 respectively. As a result, successive Chancellors have only ever reduced the rate since Mr Healey's 1975 Budget. It is currently charged at 20pc on income earned between £12,571 and £50,270. Experts now predict that Ms Reeves will be forced to either increase taxes or cut spending in the autumn Budget to avoid breaking her self-imposed fiscal rules. Britain's tax burden is already soaring to a post-war high, with the income tax bill expected to leap from £260bn in 2024-25 to £310bn in 2027-28. Despite this, some experts think further tax rises are now 'inevitable'. Nimesh Shah, of Blick Rothenberg, said: 'Given the current state of the country's finances, and global events likely to have fully wiped out the Chancellor's fiscal headroom, it appears inevitable that income tax has to increase at the next autumn Budget.' However, he said this was more likely to come in the form of a reversal in the Conservative government's National Insurance cuts. 'For me, a more likely 'win' for the Chancellor would be to reverse the Conservative government's National Insurance cut – citing that this measure was always unsustainable for the country's finances.' Alternatively, the Chancellor could extend the freeze on income tax thresholds. Rather than increasing the rates, the previous Conservative government chose to freeze income tax thresholds for years – generating billions in extra revenue by stealth as rising wages pushed workers into higher tax bands. Laura Suter, of stockbroker AJ Bell, said: 'While Labour made an election promise not to raise taxes on working people, they have already done so by the back door by continuing with the income tax band freeze that started under the Tories.' She added: 'The Chancellor could extend the freeze further into the future if she wanted to continue this boost to taxes – and that's likely to be a more palatable option as it doesn't strictly raise income tax rates and so doesn't break the manifesto promise.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
