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Income tax

Q: What impact does the new tax regime for high earners have on my finances and what can I do about it?

A: From 6 April 2010, people with an annual income exceeding £150,000 will have to pay a top rate of 50 per cent income tax on the excess over £150,000, subject to an increase in the prevailing rate of income tax.

Individuals with an 'adjusted net' income of more than £100,000 - broadly income less certain allowable deductions (such as pension payments) - will pay an effective rate of 60 per cent on income between £100,000 and £112,950 because of the erosion of their personal allowance. For every £1 of income over £100,000 they will lose £1 of personal allowance.

Careful investment and pension planning can ease the burden. As many GPs are self-employed, they can make additional personal pension contributions, on which they get tax relief to reduce their income.

The contribution limits changed in 2009 and a cap of £30,000 to £45,000 has been proposed. Take professional advice.

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