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HELP - Income Tax Band question

kippy Avatar
8y, 1m agoPosted 8 years, 1 month ago
Would anyone (experienced) know how the 40% income tax band works?
2008-09 Higher rate: 40% Over £34,800

1. What is the income amount that equates the tax paid by anyone earning more than £34,800?

2. Are bonuses included? What other legit ways (in a payrise package) can an employee ask for a decent raise so that it is worth going into the higher tax band?

Thanks in advance.
kippy Avatar
8y, 1m agoPosted 8 years, 1 month ago
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#1
Basically anything earned over the 34,800 gets taxed at 40% full stop.

A bonus is taxable but a Christmas Bonus is tax exempt.

This link may help you a bit more

http://www.adviceguide.org.uk/em/index/life/tax/tax-exempt_and_taxable_income.htm
#2
That £34800 is taxable income, so you add on your basic allowance (for a single person that is £6039) and you only pay 40% tax on anything earned above £40839 not on all of it. So if you earn £39000 then your tax would be £542 per month and if you earn £42000 you pay £618 per month. Bonuses are taxable and added to your salary.
This online calculator should help.
#3
StevenA2000_uk
[COLOR="Red"]Basically anything earned over the 34,800 gets taxed at 40% full stop.[/COLOR]

A bonus is taxable but a Christmas Bonus is tax exempt.

This link may help you a bit more

http://www.adviceguide.org.uk/em/index/life/tax/tax-exempt_and_taxable_income.htm


That bit isn't true for a single person with a tax code of 603 you can earn upto £40839 before you pay 40%.
#4
StevenA2000_uk
Basically anything earned over the 34,800 gets taxed at 40% full stop.

[COLOR="Blue"]A bonus is taxable but a Christmas Bonus is tax exempt[/COLOR].

This link may help you a bit more

http://www.adviceguide.org.uk/em/index/life/tax/tax-exempt_and_taxable_income.htm



Nope, a Christmas bonus, as with any other type of bonus, is taxable.
#5
thank you for your replies and helpful links, all repped.
#6
Trickyjabs
Nope, a Christmas bonus, as with any other type of bonus, is taxable.


I think you'll find that it depends on how and what form the bonus is paid. If your thinking whopping great wads of cash then yes, however some companies give it in form of vouchers etc which they can process as an expense which is tax-free.
#7
interesting re: vouchers bonus. cheers.
#8
StevenA2000_uk
I think you'll find that it depends on how and what form the bonus is paid. If your thinking whopping great wads of cash then yes, however some companies give it in form of vouchers etc which they can process as an expense which is tax-free.


Think you'll find the tax man will see any bonus as taxable, even in the form of vouchers, etc.
Otherwise, why wouldn't everybody jst get paid in vouchers and not pay any tax at all? ;-)

I used to work in a finance department and there's not much you can get away with. The only way you can normally 'pay' someone a non-taxed amount is 'in lieu of services' as part of a severance package.

The best way of avoiding tax/NI is for employers and employees to effectivly 'barter' for services. Again, the tax man will look at things like this, but a clasic example is somebody who works in a nursery putting their children into the nursery in exchange for a deduction from their wages.

I'm being a bit nerdy, but here's a simple example:

Staff salary = 15000
Est Tax/NI = (3000)
Net Salary = 12000
Nursery Fees = (5000)
Net Cash In Pocket = 7000

OR

Staff Salary LESS Nursery Fees = 10000
Est Tax/NI = (1500)
Net Salary = 8500

So you can see, by doing a 'trade' of services, the employee has 'saved' 1500 pounds a year. The downside is that the employee may show a lower income when coming to apply for Mortgages/Loans etc. You must also take into account how it affects tax credits/benefits etc!!! It's a bloody minefield!! :p
#9
indeed it is! *head spinning

but you've been very helpful, thanks.

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