A. The 60% rate is an effective rate rather than an actual rate. Let us suppose you have a company director client considering the possibility of taking a bonus. Assuming he has no other income, if his total pay is currently £100,000 he has taxable income of £88,500 after deducting the personal allowance of £11,500. The personal allowance is reduced by £1 for every £2 of income above the income limit of £100,000. So if he takes a bonus of £23,000 the personal allowance is reduced to zero and his taxable income is £123,000.
The increase in taxable income from £88,500 to £123,000 is £34,500 and tax at 40% on that increase is £13,800. Tax of £13,800 on a bonus of £23,000 is the equivalent of a 60% rate of tax.
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