UK income tax hike was world’s highest for 2010

UK income tax hike was world’s highest for 2010

11:08 AM, 28th October 2010, About 13 years ago

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British taxpayers are vying with those in Sweden, Denmark, and the Netherlands to pay the highest rates of tax in Europe.

Top rate taxpayers here also suffered the largest tax hike in the world when rates soared to 50% for those earning £150,000 a year or more in April, according to a report by accountants KPMG.

Austria and Belgium shared fourth place in the EU tax table with the UK, both charging a 50% income tax top rate.

The UK’s was ranked 13th in 2009’s EU tax league.

Propping up the table is Bulgaria, charging income tax at just 10%, with Lithuania and the Czech Republic next with a 15% rate.

EU taxpayers pay income tax at an average 37.2%, up from 36.7% in 2009.

Property investors who are victims of eye-watering taxes do have a way to slash their bills with a simple but effective property tax strategy.

The principle is simple – property investors pay tax on their rental profits, so if rental profits can be reduced, the amount paid in to HM Revenue and Customs coffers decreases as well.

Every pound clawed back cuts a tax bill

Increasing or decreasing rental profits depends on managing business expenses.

Every pound clawed back as a business expense reduces a tax bill by 20p for a lower rate taxpayer and 40p or 50p for a top rate taxpayer.

Take Mr and Mrs P who own several HMOs (Houses of multiple occupancy) and letting properties in the Midlands. Both are higher rate taxpayers.

They had net rental profits of £6,000 (Mr P) and £12,000 (Mrs P). They faced a tax bill of £7,200.

Neither has ever claimed home as office costs, business mileage, or capital allowances – some of their properties are HMOs that allow this claim.

When these figures were included in this year’s rental accounts and last year’s tax return was amended to reflect the claim, £8,750 profit was clawed back as business expenses. This reduced net rental profits from £18,000 to £9,250 with a corresponding tax saving of £3,700 cutting their tax bill to £3,500.

This strategy equally applies to the self-employed in other business sectors who want to cut their taxes.

If you would like further advice on tax or accountancy please call The Money Centre’s Customer Care Team on 01603 894525 and we will be delighted to refer you to our Joint Venture Tax Partners who specialise in property taxation. The initial introduction is a no cost no obligation service.

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