New rules meaning staff must pay 50p tax on every pound they earn in excess of £150,000 have come into effect
This is in addition to the ‘anti-forestalling’ rules potentially restricting higher rate tax relief on pension contributions for those with an income in excess of £130,000.
Many more employees will be affected by the chancellor’s decision to freeze both the personal allowance and the basic rate tax band for 2010/2011 in addition to the forthcoming 1% increase to National Insurance Contributions in April 2011.
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According to industry experts, this is all the more reason for employers to offer employees financial education to help manage their finances.
According to the HR Reward Survey 2010, 39% of employers do not currently offer any form of financial education, nor do they have plans to do so.
Paul Bloomfield, tax specialist at WEALTH at work, said: “We are working with many of our corporate clients in responding to the tax changes by providing communication, education and one-to-one technical guidance. Those employees with a base pay in excess of £70,000 are commonly being identified as requiring support; the value of cash bonus, unapproved share awards, taxable benefits together with any personal income mean the various thresholds could be exceeded.”
Jonathan Watts-Lay, director at WEALTH at work, added: “In response to the tax changes many of our corporate clients are seeking to ensure that employees make optimal use of the financial-related benefits available to them, particularly those via salary sacrifice resulting in cost savings for both the company and its employees. More flexible savings options are also being considered in particular for those higher earners likely to be impacted by the removal of higher rate tax relief on their pension contributions from 2011.”
