With the new 45% tax rate planned for 2011 and a reduction in personal allowances when earnings are over £100,000, there is a great deal of work that needs to be done for high earners to limit exposure to the new higher rates.

All higher earners should see an adviser before the end of the 2010 tax year to put plans in place. That said, high earners need to understand that to benefit from the tax increases (yes, it is possible to benefit!), then income now must be deferred for income in the future.

The most obvious way to benefit is to make additional contributions to pensions. With the higher rate at 45%, even more tax relief will be possible.

For example: if you earned, say, £105,000, the £5,000 would reduce your personal allowance by £1 for every £2 earned and would also cause you to pay £2,000 in tax. In addition to that, your employer would pay National Insurance on your earnings.

However, if you reduced your income to £100,000, you could have your employer put your £5,000 into a pension pot. This would immediately save you £2,000 in tax, but, in addition, you would not only avoid the £2,500 reduction in your personal allowance, but also the further £1,000 tax you would have paid at 40% on that amount. You may even be able to have your employer pay into your pension the NI that they would have paid!

So, if you took the £5,000 earnings, you would end up with around £2,000 after tax and allowance amendments. However, if the money went into your pension you would keep the £5,000, or even £5,665 if the employer added the NI contribution.

You can take this further by perhaps paying the salary into a VCT scheme instead of a pension, to receive tax relief. Then, after the qualifying period, transferring the money into your pension to get a second set of tax relief!