Q&A: how to avoid £100k personal allowance taper

In our regular Q&A series from Croner Taxwise, in the run-up to the self assessment deadline of 31 January, Alexandra Fielding looks at ways to mitigate the risks of reaching the £100,000 personal allowance taper through the use of charitable donations

Q: My client’s 2017/18 net income is just over £100,000 and their personal allowance is being tapered. Is there anything that can be done now?

A: Your client can make a qualifying gift aid donation before their 2017/18 tax return is submitted and treat the gift aid donation as being made in the 2017/18 tax year.

Although your client will still technically be out of pocket after making the donation, their chosen charity will enjoy an additional 20% increase on the donation made by your client and your client will receive marginal tax relief of 60% (40% plus the 20% relief lost with the persona allowance tapering).

It is also possible for the taxpayer to make a donation rather than pay a 60% marginal tax rate on some of their income, through a qualifying donation.

The ‘carry-back’ of qualifying gift aid donations could also be beneficial for taxpayers with annual income which exceeds the £50,000 threshold for the high income child benefit charge. In this instance, they could make sufficient donations to bring their adjusted income below the threshold.

About the author

Alexandra Fielding ACA CTA is a tax adviser at Croner Taxwise advice lines Tel: 0844 892 2470 

This article first appeared in Croner Taxwise TQOTW January 2019

Further reading

Charity donations and income tax relief: how to claim

Charities: tax pros and cons of setting up a charity - part 9

Charities: tax implications of charitable giving - part 10

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