Simply Tax

High earners

Definitely not a bad position to be in if you’re earning over £100,000 a year. But it is important to understand the tax implications if you’re earning over this amount.

A frequently asked question by our users is why they need to fill out a tax return if all of their income comes from their PAYE job… valid question indeed!

The main reason is that, actually, once your earnings go over £100k per annum, you gradually start to lose your personal allowance.



Yup… you read it right! In fact, for every £2 you earn over £100k, you lose £1 of your personal allowance. So, if your personal allowance is £12,500 for the tax year, you lose your personal allowance by the time you reach £125k!

This sounds like a double whammy of tax

A quirk within the tax system, but that is correct. This means you end up paying up to 60% tax between £100k to £125k. Beyond that, as you would have already lost all your personal allowance, you would be taxed a flat 40% up to £150k worth of earnings. Anything above that level is taxed at 45%.

Let’s take a look at an example:

  • Your normal salary is £95,000 per annum
  • You receive a bonus of £15,000
  • Takes your overall earnings to £110,000 for that tax year

Without the bonus, you wouldn’t have been required to complete a tax return, and your tax bill would have been £25,500.

With the bonus included:

Personal allowance reduced by £5,000, so only £7,500 is tax free.

Next £37,500 taxed at 20%

Remainder of £65,000 taxed at 40%

Can I do anything about this?

There are a couple of ways in which you could be more tax efficient and perhaps plan ahead:

  1. Donate to a Gift Aid registered charity and declare it in your tax return
  1. Increase your pension contribution for that tax year
  1. Look at tax efficient investments, that provides tax relief for higher rate earners

Sounds confusing? Don’t fall foul of HMRC legislation!

If your earnings are more than £100,000 per annum, you must register for and complete a self-assessment tax return. If not already registered to file one, you must do so immediately.

Create your account

Simple and easy registration to get you started, for our platform to complete your tax return.

Answer a few questions

Use our intuitive wizard and upload relevant information

We’ll handle the rest

We’ll let you know if any documents are missing. Leave the rest to us. We review, calculate, prepare and submit your tax return on your behalf.