40% tax band

Von Smallhausen said:
Pay and pensions dept said otherwise. I hope it is you who are right though as NI increase and proposed pension increase if Tom Winsor gets his way will be a sting in the pay packet.
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Its not changed mate...the bands sit on top of one another, as always. The HR has fallen slightly to counteract the increase in PA, meaning that total burden will hardly change for most.
 
Von Smallhausen said:
Pay and pensions dept said otherwise. I hope it is you who are right though as NI increase and proposed pension increase if Tom Winsor gets his way will be a sting in the pay packet.
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it must be comforting to know that your pay and pensions dept don't know anything about pay (and probably pensions) :p
 
Jez said:
Its the same as always, except the personal tax free allowance has risen to 7475, and the basic rate band has reduced to 0-35001.

Meaning that you do not enter the higher rate (40%) taxation band until you earn a package of £42476 per year.
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unless I'm mistaken, the wording is quite clear:

20% on annual earnings above the PAYE tax threshold and up to £35,000
40% on annual earnings from £35,001 to £150,000
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these are thresholds.. not banding's as you might be thinking.. I could be wrong though.
 
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Jez said:
Its the same as always, except the personal tax free allowance has risen to 7475, and the basic rate band has reduced to 0-35001.

Meaning that you do not enter the higher rate (40%) taxation band until you earn a package of £42476 per year.
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...are you sure? I thought the bands "overlap" so you still pay 40% tax on anything over £35,001, it's just the first £7475 attracts no tax followed by basic rate tax up to £35k and 40% on anything over.

So if you earn £100k pa you pay

£0 - £7475 @ 0% =£0
£7475 - £35,000 @ 20% = £5505
£35,001 - £100k @ 40% = £25999

Giving a total of £31,504 paid in tax *shudder*.

Obviously it's a simplistic example and doesn't take into account NI nor, as Admiral Huddy mentioned, other "allowances and benefits" you lose as you're in the 40% bracket.

Interestingly because you no longer can combine your wifes (or husbands) tax allowance into one "married mans allowance" If only one partner in a marriage works whilst the other looks after kids you in effect "waste" £7475 of tax free allowance per year. Unless of course you do something clever with using it against interest on savings which with interest rates where they are is "optimistic" to get to the point where you use it all.
 
Why are you questioning things? That is not how income tax works, and never has. The bands do not overlap.
 
borich_planner said:
I am now really confused, to make it worse I have company car as well..
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There is nothing to be confused about. The personal allowance has risen by £1000. The basic rate band has fallen a bit.

In reality your tax burden will hardly change. If you dont understand it, dont worry about it. It will make very little difference.

http://listentotaxman.com/

^^ Use that site if you want to work yours out, put your tax code into the tax code box, select 11/12 for the year, and put your yearly salary in.
 
How can people not understand how our tax system works?! I'm more exposed to some of the intricacies than most, but in a link posted in this thread it is clearly explained:

http://www.tax-calculators.co.uk/incometaxbands.html said:
How It Works

* Take your gross annual income and deduct allowances to get your taxable income.
* The first chunk of taxable income up to the basic rate top band is taxed at the basic rate.
* The next chunk is assessed at the upper rate and so on.
* To understand when you start paying higher rate tax. Add your allowance to higher basic rate band.
* In 2010/2011, most will start paying 20% tax at £6475 and 40% tax at £43875
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A company car will reduce your tax free allowance down from 7475 increasing your tax.
 
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DRZ said:
How can people not understand how our tax system works?! I'm more exposed to some of the intricacies than most, but in a link posted in this thread it is clearly explained:
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aardvark said:
+1

the 40% tax limit last year was around 44k, the new one is 42k - it certainly isn't 35k, that would be ridiculous.
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Indeed. I have no idea why or how people who pay thousands of pounds in tax have not taken the time to understand the fundamentals of the UK tax system into which they pay.
 
nkata said:
0 to 35,000 @20% however first 7475 is non taxable.

35,001 to 150,000 @40%

Therefore for a £40,000 income you pay (£35,000 - £7475) x 0.2 + £5000 x 0.4 = £7505 or £625 per month.

A company car will reduce your tax free allowance down from 7475 increasing your tax.
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No!

The bands are bands of your taxable income!

£40,000 - £7475 = £32525 = 20% tax on that = £6505
 
It's not good :( especially with offshore rates you break the equivalent of 150k salary :(

KaHn
 
I've got no problem with paying my taxes like a good citizen, however i do think our whole country needs to be re-evaluated in terms of wealth.

I'm now in the 40% tax band yet can only afford the mortgage on a 1 bedroom flat in which i live with my wife and baby daughter, we're labelled as 'high income earners' yet i can't afford a car as the monthly running costs will eat too far into my family budget. I can move to a cheaper area yet that won't offset the increased commuting cost, or i can find a lower paid job in a cheaper part of the country, which again doesn't make a huge difference.

We're actually leaving to live in the USA next month which is bitter-sweet for me, i want to stay here but there is something terminally wrong with a country when someone earning over £35k cannot afford an average sized 2-3 bedroom family home. For all it's faults the USA still has some semblance of normality, whereas someone earning an average wage can afford an average home for their family and comfortably live.

I consider myself hugely fortunate to have options but can't avoid the fact that something is not right with this country where an average family gets hit by taxes that were originally envisaged for the rich (e.g. inheritance).
 
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