Delving Deep into Tax Evasion Strategies: A Discussion on Extreme Measures to Prevent a Personal Tax Audit, as heard on the This is Money Podcast
In the latest episode of This is Money podcast, hosts Georgie Frost, Lee Boyce, and Simon Lambert delve into the intricacies of the British tax system and its impact on taxpayers. One particularly concerning issue they discuss is the 60% tax trap, which affects individuals whose income exceeds £100,000.
The 60% tax trap kicks in when your income surpasses £100,000. For every £2 you earn above this threshold, you lose £1 of your personal allowance, which currently stands at £12,570. This reduction continues until your income reaches £125,140. In the bracket between £100,000 and £125,140, taxpayers pay the higher rate of 40% income tax. Due to the loss of personal allowance, they effectively pay an additional 20%, resulting in a total effective tax rate of 60%.
This effective 60% tax rate means that for each additional pound earned within this bracket, taxpayers effectively lose 60p to tax. For certain groups, such as parents relying on childcare benefits, earning above £100,000 can lead to additional financial losses beyond the tax implications.
However, the podcast team offers some strategies to help mitigate the effects of the 60% tax trap. One such strategy is by contributing to a pension. This not only reduces taxable income but also provides tax relief, which can help recover some of the lost personal allowance.
The podcast also addresses a listener's question about whether an 8-foot fence is allowed, providing information on the circumstances where a neighbor might claim a planning breach over an 8-foot fence. The team offers general advice, but does not provide specific details about the listener's situation.
The This is Money podcast is published every Friday on This is Money and various podcast platforms, including Apple Podcasts, Spotify, Amazon Music, and more. It can be downloaded on Apple devices from the App Store and on Android devices from the Google Play Store. The podcast also features a comments section where listeners can discuss the topics covered in the podcast, and the team provides a link to the comments section for those who want to join the discussion.
Despite the complexities of the British tax system, the podcast team aims to provide clear, straightforward information to help listeners navigate their financial lives. As the podcast team points out, many economists consider the British tax system to be a total mess, but understanding its complexities and planning accordingly can help taxpayers make the most of their financial situation.
[1] HM Revenue & Customs. (2021). Personal allowance. Retrieved from
Investing in pension funds could help mitigate the effects of the 60% tax trap by reducing taxable income and providing tax relief, thus recovering some of the lost personal allowance. For those concerned with personal-finance, understanding the intricacies of the British tax system and exploring various investment options such as mortgages and pensions can help minimize the impact of high tax rates.
