Personal Allowance

Ev0 · 22 Apr 2013 at 00:10

PMKeates said:
I work in a bizarrely specialised industry, where even after years many people still don't have a clue what's really going on.

Didn't think you were in the civil service

HangTime · 22 Apr 2013 at 00:32

The_Abyss said:
That's not quite correct, as more and more businesses are choosing to make pension contributions via salary sacrifice which negates NI.

Not looking to get into a pedants debate

but one could argue that in a salary sacrifice scheme, technically the employee isn't actually making contributions, so what he said wasn't necessarily incorrect as he was talking about the individual's contributions rather than the employer's (although it is still worth pointing out such schemes as you have done).

For people with kids who use childcare, childcare vouchers are another option worth looking in to, although the system is changing in a couple of years I believe.

One thing I'd be interested to know is how tax is handled in cases where a person has a rated annual salary above the threshold and earns that pro rata at the start of the tax year, but ends up at the end of the year earning below the threshold (e.g. due to maternity leave), presumably they pay tax in the early months at the rate as if they were going to earn that much all year round, and then get a rebate in the new tax year? Or can the system 'work it out' during the course of the year and charge less tax than normal to start repaying the 'over taxation' that happened earlier in the year?

The_Abyss · 22 Apr 2013 at 00:52

Pedants debate noted, but the employee has wilfully sacrificed salary to enable employer contributions. The employer normally bears the cost, out of NI savings. It is still a contribution out of remuneration

Use of salary sacrifice, especially when discussing personal allowances and tax bands, is very, very relevant.

robgmun · 22 Apr 2013 at 00:58

[TW]Fox;24152404 said:
I'm no socialist but raising the tax of the lowest earners to fund a tax cut for the higher earners probably isn't a sensible move right now.

If you're no socialist then please don't make clueless statements as if you were one

Freakbro · 22 Apr 2013 at 05:50

Monserrat said:
On topic, what's the personal allowance for NI? I think it's 9% of your wages but can't remember at what threshold it kicks in.

NI for PAYE is 12% and kicks in after £149 / week (after £797 / week it drops to 2%). Though unlike tax it is non-cumulative.

For self employed its 9% on your profits with an allowance of £7,755 NI free (dropping to 2% over £41,450)

Freakbro · 22 Apr 2013 at 06:12

No1newts said:
I would hardly call someone on 45k wealthy certainly a comfortable lifestyle but anything but wealthy.

No1newts said:
I'd call you envious.

100k I can see the wealthy tag coming along but less than 50k whilst it can offer a decent lifestyle it would hardly allow you the freedom to do what you want, when you want, which I would see being wealthy as offering.

I would say this just shows peoples distorted view of income distribution in the country and how the media portrayal of the super rich makes things like that seem the norm. Its quite shocking how 'little' you have to earn to be in the highest earning brackets in the UK.

A gross income of £21k is the 50% income distribution point, whereas £45k puts you in the top ~15% of earners. £50k is top 10%, £68k is top 5% and then the massive jump to £156k to be in the top 1% of earners.

http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom

robgmun · 22 Apr 2013 at 07:03

I would say £50k+ was wealthy. That's £3k a month take home pay after tax. It's enough for pay a mortgage for a decent sized house, pay the bills and support a avarage sized family with good food and clothes without being too tight on the budget and your partner not working.

That's where the 45% tax should kick in (heck it should be 40% to be frank), it's set far to low IMO

Freakbro · 22 Apr 2013 at 07:09

HangTime said:
One thing I'd be interested to know is how tax is handled in cases where a person has a rated annual salary above the threshold and earns that pro rata at the start of the tax year, but ends up at the end of the year earning below the threshold (e.g. due to maternity leave), presumably they pay tax in the early months at the rate as if they were going to earn that much all year round, and then get a rebate in the new tax year? Or can the system 'work it out' during the course of the year and charge less tax than normal to start repaying the 'over taxation' that happened earlier in the year?

The latter. Due to the cumulative nature of income tax through the PAYE system, you pay tax on your 'to date' pay less your 'to date' allowance. So you will even get tax refunds through the PAYE system if your pay drops enough in a month.

atpbx · 22 Apr 2013 at 10:55

Monserrat said:
Yeah it's £9.4k starting now. I've worked most years since year 2000, and interestingly, it went up much slower in those days. It was around £4k in 2000, then it was £5k in 2007. Bigger increases started in 2008, so that over the next 7 years (same time length as £4k-£5k) it has effectively doubled to £10k in 2014.

How dare those evil Tories increase the personal tax allowance to help the lowest earners!

This combined with slashing benefits should steer people back into work.

Note the word "should" as they are actually more likely to just squeal and complain.

Yaayuh! · 22 Apr 2013 at 11:04

No1newts said:
How is increasing personal allowance effecting high earners?

Or assuming you mean lowering the 40% limit I would hardly call someone on 45k wealthy certainly a comfortable lifestyle but anything but wealthy.

Depends on a few things i.e. where you live and what you're comparing it to. Also depends on what you consider "wealthy" to be, it's a term which is based quite heavily on opinion.

To me wealthy is over 30K outside of the city. However, i'm sure my MD would disagree.

SDK^ · 22 Apr 2013 at 11:19

robgmun said:
I would say £50k+ was wealthy. That's £3k a month take home pay after tax. It's enough for pay a mortgage for a decent sized house, pay the bills and support an average sized family with good food and clothes without being too tight on the budget and your partner not working.

I disagree with the partner not working statement. From my experience, for everything listed above to be achievable then both parents would need to be working - £50k isn't enough to support that.

Orch · 22 Apr 2013 at 11:27

Christ, and I thought I was getting a bit right wing in my old age.

Increase the tax on low earners so high earners can pay less? Have a word.

BoonMonkey · 22 Apr 2013 at 11:35

So in layman's terms, we get more money because of less tax, correct?

E: Based on a £12,000 p/y wage for myself!

Orch · 22 Apr 2013 at 11:43

Yes, more net income for basic rate tax payers.

BoonMonkey · 22 Apr 2013 at 11:44

I welcome that with open arms then

robgmun · 22 Apr 2013 at 13:11

SDK^ said:
I disagree with the partner not working statement. From my experience, for everything listed above to be achievable then both parents would need to be working - £50k isn't enough to support that.

Only if your hemorrhaging money on fags, booze and gambling without at least watching the pennies. If you're careful with money then it's very easily doable :confused:

All bills + mortgage really shouldn't be more then 2k a month in London, which leaves 1k on food, clothes and a couple of nights out a week and probably save a little for a holiday once a year.

If you can't manage on 3k a month after tax then you're doing somethine majorly wrong!

SDK^ · 22 Apr 2013 at 13:25

robgmun said:
Only if your hemorrhaging money on fags, booze and gambling without at least watching the pennies. If you're careful with money then it's very easily doable

All bills + mortgage really shouldn't be more then 2k a month in London, which leaves 1k on food, clothes and a couple of nights out a week and probably save a little for a holiday once a year.

If you can't manage on 3k a month after tax then you're doing somethine majorly wrong!

We both don't drink, smoke or go out too often and our outgoings are over £5k per month. We live in a pretty standard area of the Midlands.

Also - in your post above; you are fogetting about transport costs. Either the costs of car ownership or public transport.
Just our mortgage and transport costs are over £3k per month.

Jono8 · 22 Apr 2013 at 13:29

SDK^ said:
Just our mortgage and transport costs are over £3k per month.

thats presumably because you just bought a brand new BMW

Eliot · 22 Apr 2013 at 13:29

semi-pro waster said:
Up to a point outgoings and location are a personal choice but it's undeniable that the greatest number of jobs that pay £45k (or above) are in London. If you can't find a job paying that much in a cheaper area then you've either got to live in London or commute into London - both those options cost in different ways e.g. a season ticket for train travel could be £5k per year as I know a couple of people who pay around that figure.

If you're comfortable on £20k then congratulations, you've got very low outgoings and are in a reasonably fortunate position - that doesn't automatically imply that everyone is in the same position nor that they could get into that position if only they willed themselves to do so.

This This This.

33k in london is 21k in South wales and about 19k in West Wales by my own (strictly rough) estimation.

Deleted User 234324 · 22 Apr 2013 at 13:38

Average income here in Torbay is around 13k so any slight tax change has a large impact.