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Income Tax!

Discussion in 'Pay and conditions' started by hodgsonamanda, Apr 8, 2012.

  1. I've just returned from a wonderful experience travelling around Vietnam and have started looking into taking up a permanent post, hopefully enabling me to get a mortgage and buy a property sometime in the not too distant future. I'm at U2 on the pay scale, and in previous years this has meant I've been taxed at the basic rate of 20%. It would appear now though, that in a full tax year where I am fully employed I will now fall into the highter tax band and be taxed at 40%. I've worked out that my gross pay minus tax alone will now be £21,268.20. If I were to earn just £1077 less, I'd be £5,150.80 better off overall (before pension and NI.) Can anyone tell me if I'm waaaay off the mark in my calculations, or should I pack my bags and head off to sunnier climes? Also, can I go back to U1 [​IMG]?
    All opinions listened to........and yes I know I'm a lucky wotnot!
    Thanks, Amanda.


     
  2. I've just returned from a wonderful experience travelling around Vietnam and have started looking into taking up a permanent post, hopefully enabling me to get a mortgage and buy a property sometime in the not too distant future. I'm at U2 on the pay scale, and in previous years this has meant I've been taxed at the basic rate of 20%. It would appear now though, that in a full tax year where I am fully employed I will now fall into the highter tax band and be taxed at 40%. I've worked out that my gross pay minus tax alone will now be £21,268.20. If I were to earn just £1077 less, I'd be £5,150.80 better off overall (before pension and NI.) Can anyone tell me if I'm waaaay off the mark in my calculations, or should I pack my bags and head off to sunnier climes? Also, can I go back to U1 [​IMG]?
    All opinions listened to........and yes I know I'm a lucky wotnot!
    Thanks, Amanda.


     
  3. As far as I was aawre income tax was progressive, in as much as you pay 20% tax from up to the higher tax band, and only pay higher rate tax in the amounts above threshold - not everything you earn.
     
  4. BillyBobJoe

    BillyBobJoe Established commenter

    Unless I'm missing something obvious, are you not just forgetting that the 40% is a marginal tax rate, i.e. only charged on your income above the threshold. Income below the threshold but above the personal allowance will still be charged at 20%.
     
  5. Phew, panic over! Thank you, both of you. I looked at the Income tax site and didn't appreciate that! I've been scarred by returning to an incorrest tax demand for nearly £4,000 - apparently I was working two full time posts whilst in Vietnam! Thanks again, me being a dimlo I'm afraid! [​IMG]
     
  6. jubilee

    jubilee Star commenter

    U2 is £35447 outside London.
    Pay into the TPS and your potentially taxable pay reduces to about £33k (less when the increased pension payments are implemented)/
    You then have a tax code of probably 747L which means that the first £7470 of your pay after pension deductions is free of tax, leaving £25500 approx subject to tax./
    You pay 20% tax on the first £34370 of taxable pay and you only have £25500 of earnings in that category.
    You'd need to have a gross salary of over about £45k, if paying into the pension, to come into the 40% tax band. On U2 in Inner London, you wouldn't earn enough to trigger 40% tax.
    You can't be worse off by earning more either. When your pay does rise enough to put you into higher rate tax, you only pay the 40% on the pounds you earn after £34370 of your taxable pay has had 20% tax levied on it.
    Earn one pound over the Basic Rate band and that one £ will be charged 40p tax, leaving you with 60p more than your previously received in your pay packet!
     
  7. Thank you, I panicked before I fully understood. I've got to grips with it all now.
    [​IMG]
     
  8. henriette

    henriette New commenter

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