0T tax codes are being sent out ahead of 2010/11 to those who HMRC estimates will have an income in excess of £112,950.

The personal allowance available to individuals is withdrawn from 6 April 2010 at a rate of £1 per every £2 of income in excess of £100,000.

This has major implications for taxpayers because if a PAYE code has not been amened, or if a taxpayer who would normally have earnings well below this level has an income in excess of £100,000, the marginal rate of tax which applies will be 60% on income between £100,000 and £112,950.

Tax planning for 2010/11

  • Family companies should consider dividend waivers (must be made before the start of the tax year.
  • Employers should consider salary sacrifice schemes.
  • Partnerships should consider whether a service company should operate alongside to shelter retained profits from partners higher rate liabilities.
  • Capital tax treatment: is it sensible to dissolve a company with high cash reserves in advance of higher rate tax?