It can be great news that you’ve achieved a six-figure income in your working life, but unfortunately you now face some complex financial challenges. This is certainly apparent when it comes to the amount of tax you pay and the level of pension savings you can accumulate.

On the bright side, there are some simple financial changes you can make to help manage your wealth effectively, including making the most of your tax-free personal allowance and annual allowance.

Read on to find out more. 

What is the tax-free personal allowance?

The majority of people in the UK can earn up to a certain amount before paying any income tax. This is known as your personal allowance. There is an intricate link between the amount of income tax you pay and your personal allowance.

For the tax year 2021/2022, the personal allowance is a total of £12,570 – meaning when you earn between £0 and £12,570 you do not pay any income tax at all. The more you earn, the more income tax you have to pay:

• Earnings of £12,571 to £50,270 — Basic tax rate of 20%
• Earnings of £50,271 to £150,000 — Higher tax rate of 40%
• Earnings over £150,000 — Additional tax rate of 45%

Once your earnings exceed £100,000, the personal allowance you are entitled to also changes. It reduces by £1 for every £2 of income earned. Therefore, by the time you reach an income of £125,140, you will have lost your tax-free personal allowance completely.

This is where you can be caught in a tax trap, as you earn more. When you exceed a six-figure income, not only are you paying a higher tax rate of 40%, but you also lose a certain amount of your personal allowance, meaning more of your income is liable for tax.

However, with some clever financial planning and by simply using your pension, you can make the most of your tax-free personal allowance and reduce your tax bill.

If you contribute a significant amount to your pension instead, you can reduce your income back down to the £100,000 threshold and reclaim the full amount of your tax-free personal allowance. What’s more, you can also benefit from the tax relief you can claim on your pension savings.

Pension annual allowance

When considering using your pension as part of a financial plan and reducing your level of income tax, you will also need to understand the annual allowance, and how this can change for a high earner. This can help to avoid some accidental taxation at the end of the tax year.

The annual allowance is the amount you can pay into your pension pot and benefit from tax relief. This essentially is a bonus from the government for saving for your retirement. You can use an online pension tax relief calculator to work out how much you’re entitled to.

Within a tax year, you can usually pay up to a £40,000 annual contribution into your pension (or the equivalent of your earnings in that tax year, whichever is lower). However, this is tapered for high earners. This means that if you earn in excess of £240,000 – including your employer’s pension contributions – your annual allowance is tapered by £1 for every £2 earned. This goes down to the minimum annual allowance of £4,000, if your income and employer pension contribution total more than £312,000 per annum.

There is also a lifetime allowance of £1,073,100, which is the total amount you can hold in pensions over a lifetime – as the name would suggest. In these financial circumstances when you’re earning a high income, it is essential to work with a financial advisor to ensure that you’re making the most of tax efficient vehicles and managing your wealth effectively. 

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As previously mentioned, when it comes to reducing your tax bill, and making the most of your tax-free allowances, it is always best to consult with a financial advisor. They can help you achieve your financial goals and suggest viable strategies, to suit your particular income and circumstances.

Disclaimer: Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested.

Binary options have become a very popular financial instrument for young traders. It’s obvious why: The so-called all-or-nothing options promise high profits and are rather easy to understand. In contrast to other options, traders only have to state whether the price of an underlying asset will be below or above a certain value once a binary option expires.

While they can be profitable, binary options also pose a high risk: If the trader´s prediction was wrong, the binary option goes valueless. Yet, there is only a 50% chance of making the wrong decision, which leaves 50% for making the right one. For traders, that means that binary options trading can be a fun and lucrative experience as long as it’s done with a regulated online broker like IQ Option. Check out the binaryoptions.com review on IQ Option to understand why the broker is a great partner for binary options trading. Before getting started, you should know the following fun facts on binary options.

Source: https://www.pexels.com/de-de/foto/marketing-geschaftsmann-geschaft-finanzen-7567595/

Traders Often Mix up Licenses with Regulations

We just mentioned how important it is to only trade on regulated platforms. That way, you can avoid fraudulent activities. Some brokers try to lure attentive customers by issuing their license number in a way that gets traders to believe it´s a proof of regulation. When thinking about signing up with a specific binary options broker, traders should always do some research on the alleged regulation number. If it turns out that it’s merely a business registration number, the broker is not a good choice.

Even though the provider might stick with strict intern guidelines that could guarantee a safe trading experience, a regulated broker is always the smarter choice. Traders should also keep in mind that some countries do not allow binary options trading with non-regulated brokers.

Brokers for Binary Options Trading Are Not Necessarily Experts on Binary Options

Most traders assume that an online broker that specializes on all-or-nothing options is an expert in this field – just like a hairdresser is an expert on haircuts, hair colors and hair care in general. But they’re not. In fact, online brokers are mere service providers and an interface between the trader and the exchange market.

Even though some brokers offer you many sources of information on binary options trading, you should always rely on yourself and your own trading skills. It’s up to the traders to learn from and about the market. After all, binary options are financial speculative instruments, and a broker won´t take your task as a trader away from you.

Binary Options Trading is Legal in the UK

Binary options are financial exotic options, which have been subject to fraud in the past. Due to their 50% risk of loss, some governments deem them gambling. That is why there are nations that have prohibited binary options trading. The field is a very controversial one indeed. Still, the UK government has decided to allow binary options trading.

You Do Need Trading Experience in Order to Be Successful with Binary Options Trading

With binary options, there is a 50% chance of making the right decision and making high profits. But that doesn’t mean that it’s easy to win. In order to be successful at binary options trading, it’s essential to inform yourself about the market and about economic as well as political correlations. As a prospective trader, you should also make sure to define your individual trading style and to learn about trading strategies. Only with a diverse basic knowledge will you be able to make good decisions.

And good decisions are more essential with digital options than they are with other financial instruments. Because, if your decision is poor, you´ll lament a high loss.

Traders Can Become Rich with Binary Options

Just like with any other type of investment, it is possible to become rich. But traders should be aware that it can take a long time before trading becomes really lucrative. Investors should also keep track of the underlying assets of their options, for example foreign currencies.

A minimum deposit limit is one of the key choice factors for most traders, especially beginners. Forex market is far more accessible than, for example, trading in securities. Still, that also depends on the brokerage company chosen. Some of them prefer working with professional traders with substantial budgets only, but there are also services that allow starting from quite affordable deposits.

Today, we would like to tell you about the terms of use offered by one of the most trusted brokers on the market ― FxPro. According to the rules, the FxPro minimum deposit limit is $100 ― a sum affordable to everyone. This is great news for beginners. However, one must also note that the company recommends its users to start from a deposit of $1000. The point is that many traders seek quick and big profits. So, when they have a limited budget, that pushes them to take risky steps and search for higher leverages. Obviously, that is not the best strategy for inexperienced users. On the other hand, when a trader has a significant sum at his disposal, he can earn from sales volumes without excessive risk.

If you compare the terms offered by the company mentioned to its competitors, one can say that an initial deposit limit of $100 is rather common. It is a comfortable requirement for most traders. However, there are also brokers that demand their potential clients to make bigger payments or allow them to start from smaller investments.

Now, let us discuss depositing terms at FxPro. This broker supports a full range of payment methods: bank transactions, debit and credit card payments, transfers via popular banking apps and online wallets. As for fees, all the deposits are free of charge. They are accepted in the most widely-used currencies and processed within about 10 minutes in case one uses an online wallet or a card. For local bank payments, that term is one business day. 

In the USA, the Forex market is scrupulously monitored and regulated by the government. To provide financial services to US residents, a broker must fully comply with the requirements set by the CFTC and NFA and get a license. Still, in this country, there is a good variety of brokers to choose from. The only problem is to find the most suitable company.

Obviously, we recommend you start by checking the license. You can easily find this information on the Web. Remember that, to receive legal profits and avoid scammers, you must turn to licensed companies only. Then, decide which assets you want to trade and find a few suitable services. Now is the time to compare their terms of use, namely, minimum deposit limits, commissions, spreads, penalties, additional fees, available platforms, client support, educational content. Also, if you are a beginner, you had better choose a source oriented towards copy trading or social trading. This method involves mimicking trades executed by professional traders and allows one to earn without much experience. A valuable source of information is users’ reviews and ratings of the best US Forex brokers ratings.

After you make your choice, test it with virtual funds. Most companies offer free demo accounts for that. This way, you can check whether the website selected operates smoothly and whether its functionality suits your needs. Be sure to test research functions as well.

Sure, we would be happy to recommend a few US brokers worth your attention. That will save you time. So, among the leading companies, we must mention Forex.com, IG Markets, TD Ameritrade, Interactive Brokers, and OANDA. If you are new to Forex trading, it is better to start from the latest mentioned option. But in case you are interested in advanced functionality, try TD Ameritrade or Interactive Brokers.