overtime and tax bracket

ozaudio

ozaudio

ozaudio

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as of 23rd nov my year to date taxable income is 22,820, but since then ive been doing overtime , a fair bit and its going to look like on my next pay that im a 40% tax bracket earner. how does the 40% tax bracket work exactly? will it not matter unless my year to date hits the 40% tax bracket rate or will I be charged 40% and then refunded on my next pay / end of tax year.

cheers
 
You are only charged 40% on the part of your income that is over the threshold not your entire salary. Until your total earnings for the tax year go over that threshold you should still be taxed at the basic rate. Your employer should just work it out and deal with it for you.

There's complications with things like child benefit if you or your partner are claiming it if you do go into the higher band. Answering that needs someone with more knowledge than me (in my case, wife still claiming it and then I get clobbered the equivalent).
 
Your tax code will reduce in April meaning that you will pay more tax next year. You will also probably be asked to complete a self assessment for the next few years if you remain over the 40% threshold.
 
my yearly wage wont be over 40%, its just with all the overtime in next pay it will look as if i will be based on this payslip alone. itll be back to my normal wage after this month as i don't do overtime hardly ever. its around 32k pre tax most years.
 
ozaudio said:
my yearly wage wont be over 40%, its just with all the overtime in next pay it will look as if i will be based on this payslip alone. itll be back to my normal wage after this month as i don't do overtime hardly ever. its around 32k pre tax most years.
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As above, you'll get taxed @ 40% on whatever you earn over the bracket, however next month you'll be back to normal - perhaps even being taxed less than usual. Your earnings are still under the 40% bracket once they're averaged out for the year, so you'll only be taxed as if you were earning slightly more over the year.
 
I remember in my old company we got our bonuses in the first payslip of the tax year. So we'd get taxed to hell in that month. I wasn't a higher rate taxpayer, but for that first month it certainly looked so, so I was hit at 40% but it evened out over the year.

OP I don't know if they do it per month, or averaged over the year to date. If it's the former you'll likely pay 40% tax on some of it and get refunded. If the latter, you probably won't.
 
Clov!s said:
When is your next pay? The threshold is 46000 so you are going to earn 24000 in overtime?
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every 4 weeks , so the 21st. 24000 in overtime, clearly not but what I was wanting to know is say next pay day I have £4000 pre tax, would the tax system self adjust to assume Im a 40% payer based on this wage, but clearly ive had several answers now

cheers
 
it's averaged over the year. you will pay more tax because you earnt more. then you will pay less the following month because you earnt less. if you get charged more because the system thinks you will go over into the next bracket but subsequently you don't they will send you a refund by cheque at the end of the year.
 
What he’s saying is this month he’s going to earn over £3833 next month making him look like if he did it every month he would be a higher tax payer

No you will get taxed more but not at a higher percentage
 
I like these threads when pudney comes in and is all DUDES, CHILL! LET ME TELL YOU ABOUT TAX and it's pretty sweet. I mean this thread is fun so far but it's not pudney fun quite yet.

Sometimes, when we get really, really lucky, the Accountants argue over tax and it IS GLORIOUS.
 
Used to happen to me every so often in my last job. The month my income was high I got taxed as if I was a higher rate taxpayer. In subsequent months, when my wage returns to normal, my tax was reduced so my takehome was higher for the next 4 or 5 months. By the end of the year it balanced itself out.

Whether it is something my employer adjusted on my behalf or was automatic, I couldn't say. I was also on a 4 weekly pay schedule.

/Salsa
 
Not much useful advice in this thread :D

You won't pay any 40% tax unless your year-to-date monthly average suggests you're going to be over the 40% bracket for the year. UNLESS you have a M1 tax code modifier (this would mean that you are taxed at 1/12th your respective tax brackets every month: ignoring year to date figures).

You will, however, benefit from hitting the 2% NI rate if you earn enough: NI is calculated monthly (or weekly if paid such), as opposed to Income Tax which is calculated annually. So the very top slice of your earnings for that month will see you paying LESS overall tax/NI :)
 
You are taxed cumulatively on a monthly tax basis (6th of month to 5th of following month) over the Tax Year 6th April to 5 April
You Personal Allowance for 18/19 is 11,850, so at the end of Dec you will have got approx 11,850*9/12 = 8,887.50 of that. Anything above gets taxed
The 40% band starts at 35,000 (above your Personal Allownance), 9/12 = £26,250
To pay tax at 40% on your December pay you will have had to cumulatively earn more than 8,887.50 + 26,250 = 35,137.50
So unless you are going to earn more than £13k in Dec, you'll be paying tax at 20% on your overtime
 
[FnG]MUGnolia said:
I like these threads when pudney comes in and is all DUDES, CHILL! LET ME TELL YOU ABOUT TAX and it's pretty sweet. I mean this thread is fun so far but it's not pudney fun quite yet.

Sometimes, when we get really, really lucky, the Accountants argue over tax and it IS GLORIOUS.
Click to expand...

Haha, I was just reading this thread and thinking "oh dear"!
 
ozaudio said:
every 4 weeks , so the 21st. 24000 in overtime, clearly not but what I was wanting to know is say next pay day I have £4000 pre tax, would the tax system self adjust to assume Im a 40% payer based on this wage, but clearly ive had several answers now

cheers
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Nope you wouldn't. As others have mentioned it goes on your average. So you'd have to be doing that much overtime every month for it to clock that you'll potentially go over the 40% threshold.
 
thanks for the replys, It was something that was on my mind after somebody in work told me don't go doing to many hours O/T as ill be bummed in taxes, clearly not the case... happy to continue with the " as much as you want " overtime option we have then!
 
ozaudio said:
thanks for the replys, It was something that was on my mind after somebody in work told me don't go doing to many hours O/T as ill be bummed in taxes, clearly not the case... happy to continue with the " as much as you want " overtime option we have then!
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Even if you did, it's only the bit above the threshold that is taxed higher, not the entire taxable amount. It's always worth earning more. Keeping 60% of something is better than keeping 80% of nothing :p

Plenty of people around who'll tell you not to reach the 40% bracket because they think you'll get taxed at 40% on everything and end up with less take home pay.
 
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