Tax advice for top earners – Michael LansdellFeatured Products Promotional Features
Posted by: Dental Design 10th January 2019
Are you a dental practice owner who is going to be part of the 1%? This means that you are a top earner, and will be in the small group HMRC anticipates will be paying the largest ‘chunk’ of income tax in the 2018/19 tax year.
The Treasury expects that just 1 per cent will supply a juicy 27.9% of the income tax it hopes to receive overall. By contrast, the bottom 50% of income tax payers is expected to provide just 9.5 per cent of the £185 billion total. The top 1% means those who earn at least £177,000; the bottom 50% are people who earn up to £25,500.
How HMRC deals with top earners is never a black-and-white issue. A government’s reliance on the wealthy for the bulk of its tax revenues is not a new concept, but in 2017, the Office for Budget Responsibility (OBR) called out the growing reliance on a small number of rich individuals. Fast-forward to late 2018, and fears of a no-deal Brexit are now looking more real than they did a year ago. Most experts agree that the UK economy will shrink in this scenario, including IMF chief, Christine Lagarde, who, in September, rather grimly predicted, “dire consequences” of a no deal.
High-income taxpayers would of course be affected by a recession, but dogenerally have more options than those on lower incomes: they can afford to be more mobile, for one. Yet the tax revenue from higher earners is now far more concentrated than it was 10 years ago.
To break it down, in 2010/11 the 1% contributed 25% to income tax revenue; now it’s 27.9%. In 2010/11 the bottom 50% contributed 11.3%, now it’s 9.5%. In the middle is the top 10% of taxpayers (which, in 2018/19 means they have a minimum income of £57,500) and their share has gone from 53.5% in 2010/11 to 59.7% for the current tax year.
The Chancellor cannot afford to cut taxes for the higher-income group, then. The additional-rate threshold is frozen at £150,000 and the income limit for Personal Allowance (the amount of income a person can get before paying tax) has been stuck at £100,000 for some time now. No wonder the number of high-income taxpayers has remained pretty static.
If you are a dental practice owner who is looking to reduce their tax bill – and let’s face it, most of you will be – it would be a good idea to consult with a tax expert now, in order to check that you are doing all the right things. If you enlist the services of a specialist with experience of working with the dental industry, such as the accountants at Lansdell & Rose, you can make the most of the current rules and also look at opportunities for the future, too.
Over a quarter of income tax comes from the 1%, but membership to this exclusive club is not without its problems. The UK economy is potentially sailing into challenging and unchartered waters, which – in the worse case scenario of a recession – will impact on every taxpayer. As a top earner, the knowledge that you are contributing to the lion’s share of income tax revenue, and that this represents a growing trend, might make you wonder if you should be reviewing your options. With a Budget around the corner, when taxes in general might rise, never mind the impact of the dreaded no-deal, it’s time to get organised.
To find out more, call Lansdell & Rose on 020 7376 9333,
Or visit www.lansdellrose.co.uk
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