You may think that the top rate of tax is 40%, but these days life is not so simple. The Chancellor's habit of tweaking the tax system has produced all sorts of different 'tax' rates, if you measure tax by what you lose from each extra £1 of income.

For a start, national insurance contributions will normally mean that the true top rate of 'tax' on your earnings is even higher than 40%. Then there is the potentially much larger impact of Working Tax Credit (WTC) and Child Tax Credit (CTC).

The basic idea of tax credits was to target tax benefits onto people with low or modest incomes to encourage them to go out to work and to help with the costs of child care. But the impact of these tax credits goes much further up the income scale than most people realise. When WTC and CTC were introduced in 2003, their effect on the tax system was not widely appreciated and many people wrongly assumed their earnings were too high to worry about tax credits.

Since then, the picture has changed as both awareness and the credits have increased. Tax rules change.

If you are interested in finding out exactly how the WTC and the CTC can affect you, please contact us for a detailed analysis of your situation.

The point to appreciate is that you could be subject to an effective tax rate on part of your income of 59% or even 77%. And you might well not be aware of it — simply because for every extra pound of income you earn, you pay tax and lose part of your tax credit.

But if 77% or 59% tax is bad news, then the good news flipside is the potential for the same rates of tax relief. For example, a contribution to a pension will qualify for tax relief and, by reducing your taxable income, would also boost your tax credit entitlement. Not all products and services used in tax planning are regulated by the FSA.