Ep 254: The 60% marginal rate TAX TRAP and how to avoid it

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Unveiling the Secret 60% Tax Rate and 7 Ways to Avoid It for High-Income Earners in the UK

This podcast reveals the hidden 60% effective income tax rate affecting those earning between £100,000 and £125,140 in England and Wales. Co-founder of Medics’ Money, Dr. Ed Cantelo, a chartered accountant and tax advisor, explains the complexities behind this marginal tax rate, originated from a government measure in 2010 to reduce the national debt. The discussion covers its significant impact on healthcare professionals and others close to the £100,000 income threshold. Dr. Cantelo outlines seven strategies to avoid the tax trap including maximizing employment expenses, utilizing gift aid donations, contributing to private pensions, leveraging the NHS pension scheme, planning around child benefit, equalizing income with a partner, and ultimately, considering whether to work less. The detailed insights aim to help high-income earners minimize their tax liabilities legally while maintaining financial stability.

00:00 Introduction to the Secret 60% Tax Rate

01:01 Understanding the Marginal Tax Rate

04:35 Impact on Healthcare Professionals

06:14 Seven Strategies to Avoid the Tax Trap

06:31 Strategy 1: Maximizing Employment Expenses

07:44 Strategy 2: Utilizing Gift Aid Donations

09:30 Strategy 3: Contributing to Private Pensions

11:48 Strategy 4: Leveraging the NHS Pension Scheme

12:31 Strategy 5: Planning Around Child Benefit

14:20 Strategy 6: Equalizing Income with Your Partner

15:53 Strategy 7: Working Less to Avoid Extra Tax

18:06 Conclusion and Summary