Tax planning to consider now before 6 April 2011

As the personal allowance is abated between taxable income of £100,000 and £112,950, taxpayers suffer an effective rate of 60% as the amount of their income taxable at 40% increases by £3 for every £2 earned. Those in receipt of dividends in the same bracket, which are taxable as the "top slice" of income, will suffer an effective rate of up to 49% instead of the usual 25% of their cash dividend.

There are some things that you may consider doing to avoid these higher rates. If you have the capacity to make a personal pension contribution, you could save up to £6 of tax for every £8 contributed into the scheme. Similarly, those who are philanthropic can save up to £4 of tax for every £8 contributed via gift aid, with the charity recovering an additional £2.24 if made before the 6 April 2011 (£2 thereafter). The added benefit of a gift to charity is that you may be able to carry back your donation to a previous tax year, enabling "retrospective" planning. But be warned - this is not possible with a pension contribution, and care must be taken by those who make larger pension provision or are members of a defined benefit pension scheme as tax can be clawed back in some circumstances.

Those who have income over £150,000 might also make contributions to a pension scheme or charity and save tax at an effective rate of 50%.

There are always other alternatives that can be considered, such as sharing income with a spouse, civil partner or family member, delaying receipt of income, or more sophisticated planning (for example involving tax efficient investments).

In all cases, it is important to take advice and to act sooner rather than later to ensure time is available to put any plans in place - please contact your local office to discuss your options. Alternatively, email your enquiry.