For high earning taxpayers the personal allowance is gradually reduced by £1 for every £2 of income over £100,000 irrespective of age. This results in the total loss of the personal allowance for taxpayers that had a total income over £118,880 in 2013/14 and over £120,000 in the current tax year. This creates an effective marginal rate of tax of around 60%.

Those with earnings in this bracket should consider what financial planning opportunities are available in order to avoid this personal allowance trap. This can include increasing pension contributions, making gifts to charity and investing in certain investment schemes.

For example, if your taxable income exceeds £100,000 for 2013/14 you could elect to make a Gift Aid donation in the current tax year, 2014/15, and carry back the contribution to 2013/14. This would reduce your income below the £100,000 ceiling and restore all or part of your personal allowance. A request to carry back the donation must be made before or at the same time as the 2013/14 Self Assessment return is filed. The deadline is 31 October 2014 if you file a paper tax return, or 31 January 2015 for the majority of taxpayers that file online.