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Tax changes in April...

Discussion in 'Personal' started by pinkflipflop, Jan 31, 2011.

  1. I know everyone is in the same boat and this is a difficult time for all but just felt like starting a thread to let off a bit of steam about the proposed changes in April.
    I am so stressed about the income tax/NI contribution change and the potential change in pension contributions. I am trying to read about everything but it just makes me more stressed! What with petrol going up as well and rinsing my bank account I am getting worried [​IMG]
     
  2. I know everyone is in the same boat and this is a difficult time for all but just felt like starting a thread to let off a bit of steam about the proposed changes in April.
    I am so stressed about the income tax/NI contribution change and the potential change in pension contributions. I am trying to read about everything but it just makes me more stressed! What with petrol going up as well and rinsing my bank account I am getting worried [​IMG]
     
  3. RJR_38

    RJR_38 New commenter

    Have I completely missed something? I didn't realise tax was going up - I thought it was just the tax bands changing? (ie the amount you earn before paying tax or 40% tax?)
    And I wouldn't worry about the pension contributions yet - not until things have been decided anyway.
     
  4. It's just been on the BBC News, but I was reading TES rather than paying attention so I can't be much help there.
    This might help... there's a useful graph at the bottom. But it is only about income tax.
    And yeah, I'm worried! The cost of petrol is getting ridiculous, and I'm starting to worry that I won't be able to afford to get to work. I'm trying to save as well as paying my parents back the money they leant me for my car, but the amount I can save is getting smaller and smaller.
    I don't see how it can help in the long term... people will start using credit cards again, which they won't be able to pay off, which will get them into a big old mess.

     
  5. RJR_38

    RJR_38 New commenter

    Yep, this is what I thought was happening. The 40% tax band is dropping down to 35k - now *most* teachers won't be on this pay bracket - unless you're management, or are near the top of the scale in inner London. If this is you, yes it will cost you but maybe by not as much as you think - after all the 40% is only on the amount of money OVER the 35k (So if you earn 38k you will pay 40% tax on 3k).
    The NI won't cost most people much extra - on average the site I was reading said it will cost an average wage earner £80 a year extra. Yes, its all money we need - but again myabe not as bad as you think?
    The petrol - well yeah, that SUCKS and is riduculous :(
     
  6. I know it is only minimal, but when you are on a very very tight budget and trying to pay off debts it is very stressful! Those few pounds make a huge amount of difference. Have already had to make cutbacks elsewhere with petrol now costing me £105 a month just going to and from work.

     
  7. RJR_38

    RJR_38 New commenter

    Oh and if you earn under 35k you probably won't even notice the NI rises because the basic rate before you start paying tax is going up from £5k ish to £7.5k ish - so in theory your tax bill could be very slightly lower (but then your NI will be higher so will mostly balanced out...)
     
  8. I should think the tax change won't affect young teachers like you PFF. try not to panic.

    Is there anyway you can lift share at least part of the way to work to save a bit on petrol? x
     
  9. I already earn over the 'new' threshold for 40% so while it will probably on be a few pounds, I really need those few pounds!
    Car sharing is not an option....nobody lives near me. I've told the DHT I might start sleeping in my book corner during the week to save a bit of cash! [​IMG]
     
  10. It will all be fine I'm sure.....just a natural born worrier!
     
  11. I spend about £120 a month on petrol because I fill up twice a month - ridiculous.
    It makes me cross that drivers have to pay more yet again. I dont MIND when they put prices of alcohol etc up because I have a choice whether or not to drink!
     
  12. I had no idea that the 40% tax band was dropping! Have I been living in a bubble? (Well yes, I do tend to avoid the news!)
    I'm also starting to panic. My son is 18 this year and finishes school so I am also going to lose tax credits and child benefit. Really starting to worry as it's getting more and more difficult to make ends meet, and I earn a good wage. I still struggle to keep from going overdrawn each month (sometimes even manage it!), I'm not buying clothes or going out more than once a month, no holiday booked.
    I remember being at college when my son was little and managing on my child benefit (£17 a week) through the summer. No idea how people on low incomes are managing at the moment.
     
  13. jubilee

    jubilee Star commenter

    this is the official tax office site that shows the new rates and allowances next to those of the current and last tax years:
    http://www.hmrc.gov.uk/rates/it.htm
    What you need to understand is that being charged 40% tax on taxable income over £35k (instead of £37400 at present) does NOT mean that people on those salaries pay Higher Rate Tax!
    Taxable pay is the amount of your salary left over AFTER deducting your tax free allowance AND after deducting your pension payments,
    Those not in a pension and with the current £6475 tax code will pay 40% tax once they are earning £43876 in this 2010/11 tax year and when earning £42475 in the 2011/12 tax year
    That eliminates most teachers, even if they are on UPS3.
    Crucially, you can earn far more than that before 40% tax hits IF you pay into a pension. Take your annual pay and multiply by 6.4 to get your pension contributions. Add that figure to your TAX Code and then add £35001 to reach the salary at which you will become liable for 40% tax after 6th April 2011.
    The increases in National Insurance from 11%-12% also only applies to those NOT in a pension. Those in a pension pay Contracted-out NI, which is currently 'only' 9.4% instead of 11%. The contracted-Out rate will increase, but to 10.4 % BUT FOR EVERYONE, the starting point for NI payments will increase. Currently, we pay NI on weekly earnings OVER £97, From April, we will only pay it on earnings over £102.
    http://www.hmrc.gov.uk/rates/nic.htm
     
  14. jubilee

    jubilee Star commenter

    Those not earning into 40% tax levels will be paying less tax as the Personal Allowance is increasing. They'll gain £199.80 per year, which will help to offset the 1% NI increase.
    Someone on £30k, paying into the pension and due to pay 10.4% NI from April, will pay approx £2552 pa in NI as against about £2345 now. That's a £207 increase, cancelling out the tax gains and making no real difference to most earners.
    If pension payments eventually go up from the current 6.4%, tax due will reduce.
     
  15. henriette

    henriette New commenter

    As I understand it from my friendly local IFA: because our pension is deducted from pre-tax income, we will mostly not hit the 40% threshold.
    I asked because on UP3 with a top TLR2 my "headline" figure suggests that I would be better off giving up my TLR!!
     
  16. jacob

    jacob Lead commenter

  17. I always thought you started teaching @ a similar time to me PFF (I'm in my 4th year) - and I am not touching 35k yet!!
     
  18. Eva_Smith

    Eva_Smith Established commenter

    I don't know very much about this but, as I read it, the 40% tax rate comes into effect at £35k instead of £37k, but the amount you can earn tax-free is also higher, so the difference should really be that much unless you earn significantly over the £35,000?
    I earn just under the £35k at the moment, but hope to progress to the next pay increment in September which will take me over the 40% tax-rate. However, since I can earn more before paying any tax at all, I shouldn't see too much difference, right?
     
  19. NQT1986

    NQT1986 Occasional commenter

    You won't be in the 40% tax rate when you go up a pay increment in September. You need to earn £35000+ £7475 (tax free allowance) = £42, 475 before you are in the 40% tax bracket.
     

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