In April 2010, the highest rate of income tax increases to 50% for income over £150,000. This means that take home pay will reduce by a massive 10%!
We believe that these rises in tax rates are here to stay so entrepreneurs with aspirations to have income of over £150,000, but are not there yet, should take action now!! Making plans nows could save you thousands in tax in later years.
The window of opportunity we have before the changes are introduced, is shrinking fast and 5 April will be here before we know it. Action should be taken now whilst there is still time.
Those with income over £100,000 will also be hit - by the restrictions in personal allowances. The basic personal allowance is currently worth £2,600 to a higher rate taxpayer - this is not an insignificant sum.
As the true extent of the impact of these new rules is now being fully understood, it is clear that the financial life of the entrepreneur been never been so complex, but planning needn't be complicated.
Simple actions, such as making a Gift Aid payment to charity could have a surprising impact on your tax liability especially where income is between £100K and £150K – but calculating the optimal payment is a different matter altogether!
There are, of course, more complex, strategic issues to consider too - is it now better to run your business through a limited company? Should you change your accounting year end? Should you take share options? All these questions need to be revisited as a result of the proposed changes.
Entrepreneurs should urgently review business plans and revisit strategies. Being entrepreneurs ourselves, we have first hand experience in considering these issues and take it from us these are challenging times!
For more information on how we can help please contact your usual RSM Tenon adviser or e-mail twe@rsmtenon.com