1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.
  2. Hi Guest, welcome to the TES Community!

    Connect with like-minded professionals and have your say on the issues that matter to you.

    Don't forget to look at the how to guide.

    Dismiss Notice

threshold and higher tax

Discussion in 'Pay and conditions' started by tdnorth, Jul 9, 2011.

  1. tdnorth

    tdnorth New commenter

    Hi..Ive been on MP6 for 3 years and now have TL1 and SEN2...Head is encouraging me to apply for threshold but colleagues have told me that if I do that and my income touches £40,000 my take home will be less than it is now due to paying more tax...really can't afford that...does anyone know if this is true? thanks
     
  2. Middlemarch

    Middlemarch Star commenter

    How can that be? You only pay higher tax on the additional pay which takes you over the tax threshold, surely?
     
  3. tdnorth

    tdnorth New commenter

    That's what I thought, and have been trying to work it out on that, but I've been told by 3 other people not to bother as their experience has been different...but I'm unsure if the higher tax thing for £40,000 is in yet or due to start later...I'm only earner in household so I don't want to make a mistake with this!
     
  4. Middlemarch

    Middlemarch Star commenter

    I really don't understand this. If you earn enough to put you into the 40% tax bracket, you only pay 40% on the pay you receive above the threshold - so I don't see how you could possibly end up getting less money.
     
  5. becktonboy

    becktonboy New commenter

    is the key point, people are often very ill-informed about tax matters, as am I, but I know enough to agree wholeheartedly with MM on this.

     
  6. Middlemarch

    Middlemarch Star commenter

    Thanks for that, BB. I want to add that by 'threshold' I mean the tax threshold, not the teachers' pay threshold!
     
  7. tdnorth

    tdnorth New commenter

    thank you SO much...it didn't seem to make sense to me either which is why i hesitated and tried to check it out...really appreciate your help and will put in my application. Cheers.
     
  8. becktonboy

    becktonboy New commenter

    that was how I read it - good use of upper/lower case.
     
  9. At present hitting the higher rate tax will not reduce your take home pay. However, daft as it may appear, from 2013 a large number of people will be faced with this problem. From 2013 anyone in the higher tax bracket (or has a partner in the higher rate bracket) will no longer receive child benifit. Hence going over the tax threshold by £1 could cost some people thousands of pounds.
     
  10. becktonboy

    becktonboy New commenter

    by the time I hit the higher tax rate my kids were earning more than me so it wasn't a huge problem!!
     
  11. jubilee

    jubilee Lead commenter

    If you are in the pension,that slows down your progress towards Higher Rate tax.
    Pension payments are deducted from pay BEFORE any tax is levied. You can then earn the next £7,475 free of tax.
    The next £35k of earnings is taxed at 20% and anything over that at 40%.
    Why would anyone turn down the extra money from being on UPS unless it took them just into higher rate tax AND elimintaed more in other State benefits than they get from earning more?
    Someone ouside London on UPS3 gets £36756.
    They pay £2352 per year to the TPS (probably soon to increase to £3528.
    Currently they are left with £34404 potentially taxable income, of which £7475 is tax-free, leaving £26929 that will be taxed.
    The first £35k is taxed at 20%, so they stay on 20% tax as they are nowhere near having £35k over after TPS and their tax-free allowance.
    Looking at a teacher in Inner London on UPS3 of £45k ..... they pay £2880 into the TPS, leaving £42,120 to be considered for tax but they also have a tax free allowanc eof £7475, leaving £34,645 that will incur tax. That is STILL under the £35k 20% tax bracket.
    TLRs will push teachers nearer or into HR tax, especially if in the London area but not all of them will have young children and risk losing tax credits and child allowance.
    I've heard too many teachers trot out the misinformation that they will get less take-home pay if they earn more! It's impossible. It seems to stem from the belief that once you do get into the HR tax bracket, you will pay 40% tax on all your earnings when actually you continue to pay 20% tax on the bulk of your pay and only 40% on the top tranche of earnings.
    Perhaps they should put some tax questions on the Numeracy Skills test so that future teachers won't pass up on Threshold in the mistaken belief that it will reduce their income!
    I'd dearly like to pass Threshold before I retire in 2 year's time (late entrant) but working on supply has scuppered that. The last time I applied the Head would not accept that I had supported colleagues even though my role was to support the phased return of the permanent teacher after 2 whole terms of sickness (when I taught her classes). I even planned her OFSTED lessons as she was completely at sea but apparently it was arrogant of me to have claimed (as a non-specialist in the subject) that I could possibly have had anything to do with giving a specialist planning help (the teacher could not confirm as they got rid of her after too many bouts of sick leave in her 5 years at the school ...off work more than she was at work)
     
  12. jubilee

    jubilee Lead commenter

    being on 40% tax has advantages if you GIFTAID donations to charities. The charity claims back your BR tax and you can contact the IR to get back the HR tax element.
    You are, of course, supposed to tell the IR about any savings income you have that has been taxed at 20% by the building society/ bank etc and you are due for an extra 20% tax on the interest.
    We get round this (legally) by having all non-ISA savings in my name so that no more tax is levied.
     
  13. Even if the increase didn't increase your take home pay massively it would enhance your pension (providing that you're paying into it) so that would make it worthwhile.
     

Share This Page