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Upper Rate Tax

Discussion in 'Pay and conditions' started by henriette, Oct 5, 2010.

  1. henriette

    henriette New commenter

    On UP2 + TLR of 6195 in Fringe I do not pay Upper Rate tax (40%)
    If my PM is successful I <u>should </u>move to UP3 - will that put me onto Upper Rate Tax?
    If so, I reckon that by losing Child Benefit for 2 children I would be worse off!

  2. DM

    DM New commenter

    I make that gross annual income of &pound;43,990 and the 40% income tax band starts at &pound;43,876 after taking account of your personal allowance. Your pay is frozen next year and so is the higher rate threshold.
    However, you should be OK as, the Government have announced that personal allowances will be increased in line with inflation in 2012 and a 0.26% inflation rate will be sufficient to make you a basic rate taxpayer again and secure your child benefit when the change comes in in 2013!
  3. DM

    DM New commenter

    Don't do any additional paid work such as examining, consultancy or lunch duties!
  4. brush75

    brush75 New commenter

    Yes - similar position here. I was working out that if the changes were being made this year, I'd be better off overall asking the HT to drop my TLR back from 1c to 1b! I wonder if anyone will be asking their HTs the same thing in 2013? (As it is, by 2013 I should be on U3 so I'll be stuffed anyway).
  5. jubilee

    jubilee Star commenter

    Thegovernments stated cut-off of benefits at earnings above a specified amount puzzles me as not everyone earning that salary will be paying higher rate tax. If they pay into a pension, as most teachers do, that reduces their taxable pay, usually by several thousands of pounds, and keeps someone on 20% tax .
    They really need to be looking at taxable pay, not gross earnings. Actually, they need to keep child allowance universal and slap a penny on both the higher rate tax bands (so 41% and 51% or high earners).
  6. frustum

    frustum Star commenter

    My husband's company has a salary sacrifice scheme for pension: they can opt to pay a much larger proportion of their salary into their pension scheme, and hey presto, their taxable income goes down. One person puts half his salary into his pension: I wonder how many will do the calculations and get themselves below the upper threshold.
  7. Personal allowances are going up but the width of the 20% tax band is coming down faster !!
    In 2011 the personal allowance goes up to &pound;7475 but the 20% band is reduced to &pound;34900, so the 40% tax band will start at &pound;42375 . I would not bet against this trend continuing so that more people get sucked into the higher band by 2013.
  8. jubilee

    jubilee Star commenter

    I hadn't heard about the changes for the 2011/12 tax year.
    However, 40% TAX will not be due on earnings above the &pound;42,374 that you quoted if the employee pays into a pension like the TPS, where contributions are taken from gross pay.
    Someone on &pound;42374 would pay &pound;2712 in pension which added to the personal allowance makes &pound;10187 tax free. Deduct that from gross pay and the &pound;32187 remaining stays within 20% tax.
  9. The changes were announced in the June 2010 Budget.
    The 40% tax will be due on all taxable income above &pound;42374, there are hundreds of possible items which could be added or subtracted from gross income to arrive at taxable income. Some like pensiom contributions had aready been mentioned so there is little point listing them all again.
    Someone on &pound;42374 paying &pound;2712 in pension would have a taxable income of &pound;39662. The personal allowance is included in the &pound;42374 figure which was published in the Budget.
  10. jubilee

    jubilee Star commenter

    Do you mean that the personal Allowance has already been deducted, to arrive at a taxable figure of &pound;42,374? In which case the gross earnings would be &pound;49849.
  11. I think I get the bit about taxable pay - deduct personal allowance and pension payments from gross pay, but not sure about tax brackets. Sorry to be thick about all this but, my pay is &pound;44,500 approx. Does this mean that the amount I earn up to &pound;43,000 is taxable at the 20% rate and the &pound;1,500 is taxable at 40% rate? Or am I in the 40% bracket full stop? Surely not?
  12. jubilee

    jubilee Star commenter

    Do you pay into the TPS? If so deduct those payments from your gross pay, then deduct your personal tax allowance (should be &pound;7474), then deduct the allowable portion of your Union subs and the &pound;36-50 GTC fee (inform the Inland Revenue about the last two).
    You will then arrive at your taxable pay and the first &pound;35k of that figure will be taxed at 20% in this tax year. Anyting over that, up to &pound;150k of taxable income, will be charged at 40%.
    Everyone gets a tax free allowance and everyone is charged at 20% for the next &pound;35k of taxable income before possibly incurring higher rate tax on earnings over that amount.
    On &pound;44500 gross pay, you would be paying about &pound;2848 in pension. Deduct that and the &pound;7475 personal tax allowance and you end up with &pound;34177 taxable pay, just within the Basic Rate allowance, so no liability to Higher Rate tax. To make absolutely sure of staying in 20% tax, claim tax relief on GTC fee and union subs , possibly &pound;200 together and your taxable pay reduces to &pound;33,977.
    Those not in the TPS and thus liable to 40% tax on lower earnings than you have, should seriously consider Opting back in as you save about about &pound;569 in tax through being in the pension and avoid HR tax and your total NI bill is lower as you pay the contracted -out NI rate on all your NI taxable earnings. Not being in the TPS would mean about &pound;640 per annum more in NI payments.
  13. coppull

    coppull New commenter

    It is also worth mentioning that from April 2012 anybody earning more than &pound;40000,wil pay an extra proposed 1.6% on their teacher pension contributions. Thus at &pound;43,000 an extra &pound;688 per year ,before tax relief or &pound;57.33p extra a month before tax relief.[​IMG]
    There will be further increases in April 2013 and April 2014.[​IMG]
  14. jubilee

    jubilee Star commenter

    The extra pension may have a spin-off benefit for some as if it prevents them falling into HR tax ... and they have children ... they'll keep their child benefit.
    This government is axing the child benefit for those who fall into the HR tax bracket, even by just one pound over the dividing line between BR and HR tax. Those on the borderline should find every possible tax relief item that they can to safeguard their child benefit or they will be worse off for earning slightly more than a colleague.

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