The start of the tax year brought an increase in our personal allowances, an increase in our ISA limit and an increase in the basic state pension. But on the flip side it also brought an increase in the National Insurance rates we have to pay and a decrease in the threshold at which we have to start paying higher rate tax.

So what is the overall outcome on our take-home pay? Well, that depends on the level of earnings and any arrangements in place that affect how earnings are taxed, such as pension contributions and gift aid donations.

The personal allowance has risen by £1,000 to £7,475, which is the amount of income that can be earned before being charged income tax. This allowance is kept until income rises above £100,000 and then it is withdrawn at the rate of £1 for every £2 over this, until no allowance is left for those earning £114,950 or above.

This is known as the personal allowance trap and results in an effective tax rate of 60 per cent for the income above £100,000.

Say, for example, someone earned £110,000. This extra £10,000 over the £100,000 threshold will be subject to tax at the higher rate of 40 per cent or 40p out of £1 (80p out of £2), as normal. The removal of the basic personal allowance means that relief against income tax is removed and becomes subject to tax at 20 per cent or another 40p per £2 of this income. The total of 80p and an additional 40p out of £2 equates to tax at 60 per cent.

A similar situation arises for those aged 65 and over with income in excess of £24,000. This is known as the age allowance trap and affects income from £24,000 to £28,930 up to age 74 and to £29,230 if 75 and over.

Making pension contributions, up to age 75, or gift aid payments to charities can alleviate these effects. This is because the basic and higher rate tax thresholds i.e. the amounts at which higher and additional rate tax become payable, are increased by the gross amount of the contribution or donation.