Tax on your earnings

PiKe · 21 Jul 2014 at 14:42

I was always under the impression that the basic rate of tax/NI worked out to around 20%, I've only just realised when looking into new employment, its actually more like 15%, is this as a result of the increased tax free earnings each year, or has it never been 20%?

Nexus · 21 Jul 2014 at 14:46

Are you confusing it with VAT charges on goods and services which has a current rate of 20%?

Efour · 21 Jul 2014 at 14:46

LOL i read that as tax on my ear-rings and scoffed at a new conservative fund raising attempt

Bennie-Mac · 21 Jul 2014 at 14:47

Its only 20% of the taxable wage, not the whole amount.

PiKe · 21 Jul 2014 at 14:47

Thanks Bennie.

Kemik · 21 Jul 2014 at 14:47

Read this.

TLDR; You get a set amount of tax-free income per year. The rest is taxed at 20% up to a point, with NI on top of that.

PiKe · 21 Jul 2014 at 14:49

So (theoretically) I'll end up with the same amount if I quote my gross wage to a new employer.

Energize · 21 Jul 2014 at 15:01

The tax/NI works out closer to 32% not 20%.

Jez · 21 Jul 2014 at 15:12

As of this tax year you get £10k allowance tax free (there is a very small amount of NI due below this).

20% Income + 12% NI = 32% is then levied on anything between £10k and £44,370

40% Income + 2% NI = 42% is then levied on anything between £44,371 and £160,000

Your total burden has to take the £10k tax free allowance into account

A 15% total burden tells us that you earn approx £18k pa

Deleted member 66701 · 21 Jul 2014 at 15:15

Jez said:
Your total burden has to take the £10k tax free allowance into account

If your income is over £100,000, your Personal Allowance is reduced by half of the amount - £1 for every £2 - you have over that limit. If your income is large enough (i.e. £120k), your Personal Allowance will be reduced to nil and you'll pay income tax on all of it.

rpstewart · 21 Jul 2014 at 15:21

The tax free allowance is not fixed by any means. By the time I take into account BIK costs for the car, health cover etc there isn't much of an allowance left

Hagar · 21 Jul 2014 at 15:21

I earn a bit north of the 40% marginal tax band start. Looking at my tax and NI, I pay about 25% of my gross in tax and NI. That includes a car allowance taxed at 40%

Jez · 21 Jul 2014 at 15:23

amigafan2003 said:
If your income is over £100,000, your Personal Allowance is reduced by half of the amount - £1 for every £2 - you have over that limit. If your income is large enough (i.e. £120k), your Personal Allowance will be reduced to nil and you'll pay income tax on all of it.

A 15% total burden indicates that he is earning less than £20k, let alone 100 :eek:

Hades · 21 Jul 2014 at 15:35

nkata said:
I earn a bit north of the 40% marginal tax band start. Looking at my tax and NI, I pay about 25% of my gross in tax and NI. That includes a car allowance taxed at 40%

...and as most items attract VAT it means that to buy something then you are effectively paying 45% tax on money acquired to own that item

Casdawer · 21 Jul 2014 at 15:44

http://www.listentotaxman.com/ is a great site if you want to look at your taxes from your earnings.

bazzabear · 21 Jul 2014 at 18:51

Woohoo. Apparently my take home is £11 a month more than it would have been with the same figures last year.

Guest2 · 21 Jul 2014 at 19:04

http://www.hmrc.gov.uk/payerti/forms-updates/rates-thresholds.htm

PAYE tax threshold

£192 per week
£833 per month
£10,000 per year

Basic tax rate - 20% on annual earnings above the PAYE tax threshold and up to £31,865
Higher tax rate - 40% on annual earnings from £31,866 to £150,000
Additional tax rate - 45% on annual earnings above £150,000

When I do some overtime I scrape into the 40% tax bracket. Makes me feel really happy that I am losing almost half of it after a certain point

45% on earnings over 150k. If I ever earn that much I will be leaving to live & work somewhere else

BunnyKillBot · 21 Jul 2014 at 19:18

NI is such a disgusting secondary income tax it makes me feel sick thinking about it. At least the calculations for the banded income tax can be understood. The calculations for NI are a messy drivel.

Flying_Hellfish · 21 Jul 2014 at 19:57

The whole system needs rethinking from top to bottom IMO. A higher single rate with no additional taxes makes more sense to me. Roll everything together to make it simpler. As stated above we are being taxed twice on our money which is ridiculous.

This would also have the added bonus of closing loopholes for dodgers.

I would make exception only for luxury or dangerous goods e.g. Cigarettes

weringo · 21 Jul 2014 at 20:00

BunnyKillBot said:
NI is such a disgusting secondary income tax it makes me feel sick thinking about it. At least the calculations for the banded income tax can be understood. The calculations for NI are a messy drivel.

Employer's NI is the worst. It's worded to sound like it's a tax on the employer but fundamentally it's no different to income tax on employee's NI.

Tax on your earnings

Deleted member 66701

Deleted member 66701