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Do I Need to Do a Self Assessment If I Earn Over £100k?

JAFA Accountancy

Updated: 5 days ago


Individual manually filling out a self assessment tax return

Are you confused about the tax implications of earning over £100k in the UK? In this article, we’ll discuss everything you need to know to stay on top of your obligations and avoid costly mistakes.


Do I Need to File a Self Assessment Over £100k?

If your total income exceeds £100,000, you may need to file a Self Assessment if:


  1. Your PAYE tax code doesn't reflect the reduction in your Personal Allowance, which may lead to underpaid tax.


  1. You have additional sources of income (e.g., rental income, dividends, or freelance earnings) that aren’t taxed through PAYE.


While the threshold for mandatory Self Assessment has risen to £150,000 for the 2023/24 tax year, high earners should ensure their tax affairs are in order. 


If you're unsure, it's always best to check with HMRC or seek professional advice to avoid unexpected tax bills.


Tax Implications of Earning Over £100k

Earning over £100,000 in the UK has specific tax implications, which we have mentioned below:


Reduction of Personal Allowance: For every £2 earned above £100,000, your tax-free Personal Allowance decreases by £1. This means that at an income of £125,140 or more, the entire Personal Allowance is eliminated. 


Effective 60% Tax Rate: The gradual removal of the Personal Allowance creates an effective tax rate of 60% on income between £100,000 and £125,140. This is because you're taxed at the higher rate of 40% on your income while also losing £1 of your Personal Allowance for every £2 earned, resulting in an additional 20% tax effect on this portion of your income. 


Why Do I Need to Do a Self Assessment Over £100k?

If your income exceeds £100,000, you may need to complete a Self Assessment because:


Personal Allowance Reduction


For every £2 earned above £100,000, your tax-free Personal Allowance reduces by £1, which may lead to underpaid tax if your PAYE code doesn’t account for this adjustment.


Complex Tax Obligations 


High earners often have additional income sources (e.g., investments, rental income) that aren’t taxed at source, requiring Self Assessment to report and pay the correct tax.


To Avoid Penalties


Filing a Self Assessment ensures you pay the right amount of tax on time, avoiding potential penalties for underpayment or non-disclosure.


Tax Tips for Income Over £100k UK

Tax on over £100k salary in the UK can be higher, but here are some tips to help you:


  • Increase Pension Contributions: Boost contributions to reduce taxable income and potentially stay below the £100,000 threshold, preserving your Personal Allowance.


  • Make Gift Aid Donations: Donations to charities not only benefit good causes but also lower your adjusted net income, helping you retain tax reliefs.


  • Utilise Salary Sacrifice: Opt for schemes like extra pension contributions or childcare vouchers to reduce your gross income and overall tax bill.


  • Invest in ISAs: Individual Savings Accounts offer tax-free income, helping you avoid additional tax liabilities while growing your wealth.


  • Transfer Assets: Shift income-generating assets to a lower-earning partner to utilise their allowances and lower the overall tax burden.


What We Think


If you’re earning over £100k, figuring out whether you need to file a Self Assessment can feel like stepping into a maze. The rules aren’t always clear, and the way the system works, like the tapering of your Personal Allowance, often catches people off guard.


The system could definitely be more user-friendly for high earners. For example, the loss of the Personal Allowance at the £100k mark often flies under the radar, leaving many unaware they’re effectively paying a 60% tax rate on income between £100k and £125,140. 


On top of that, HMRC’s guidance doesn’t always make things clear, particularly for people managing PAYE alongside other income streams like rentals or investments.


A more streamlined and automated way to handle tax adjustments would make life much easier and help ensure compliance without piling on extra admin work. Until that happens, getting professional advice or filing a Self Assessment proactively can go a long way in avoiding any surprise tax bills.


How JAFA Can Help


At JAFA, we simplify the complexities of tax for high earners, turning the confusion of tapering Personal Allowances and the unexpected 60% tax rate into manageable solutions.


We can help you streamline the Self Assessment process, ensuring all your income sources, whether from PAYE, rental properties, or investments, are accurately accounted for. 


We provide real-time insights and adjustments to ensure your tax code reflects the correct allowances, reducing the risk of underpayment and surprise bills at the end of the year.


Furthermore, we help you proactively optimise your finances, identifying opportunities like pension contributions or Gift Aid donations to lower your taxable income.


Contact our expert accountants in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277


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