Higher rate tax

It is a tax rate at which you pay Income Tax. The percentage of your income between £50,270 and £150,000 is subject to the higher income tax rate, 40%.

Can I reduce my higher rate income tax bill?

Yes, tax efficiency is not the same as tax evasion or avoidance; it’s simply smart financial logic. One advantage of paying a higher tax rate is receiving tax relief at a higher rate (rather than the basic rate of 20%).

Who pays the higher rate?

Whether self-employed or employed, if income falls between the higher rate tax threshold, you pay tax at a higher rate. When you work for yourself, you file a self-assessment tax return.

What do you need to know about higher rate tax?

● Even if you work full-time and your employer handles your taxes through PAYE, if you earn more than £100,000, you must file a Self Assessment tax return.
● Once you earn above £100,000, your tax-free Personal Allowance reduces by £1 for every £2 that you make above £100,000. Because of this, you pay an effective tax rate of approximately 60% on your income between £100,000 and £125,000.