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Tax Bands and Higher Tax

nrps1 Avatar
9y, 10m agoPosted 9 years, 10 months ago
Hi all,

I am about to apply for an internal promotion at my company that I have basically been told by my manager I shall get.

I am sure a payrise will be on the cards, and this drew me to wonder about tax bands.

Now the High Tax band (40%) comes in at £33,300 however we are allowed £5,225 before tax, so does this mean that I would not be taxed 40% of my salary until I reached £38,525, or £33,300?

Thanks to all who can help (ps - thinking about it, it might be better coming from someone who is on a similar salary so I know it is actual fact as websites seem to differ in opinions! ;-))
nrps1 Avatar
9y, 10m agoPosted 9 years, 10 months ago
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#1
33,300
#2
So if I was to get 33,301 then I'd end up with 22,070 take home before student loans have had a sniff?! Naughtiness, thats like a serious pay cut! Totally wrong!
#3
You can get the info from the Inland Revenue site, but basically your first £5225 is tax free, between £5226 & £33300 is taxed at the basic rate (22%), & then every thing over £33,300 is at the higher rate (40%). So if your salary is pushed over £33,300 you don't pay 40% on all your salary - just the amount over £33,300.

The link to the page showing the rates is: http://www.hmrc.gov.uk/rates/it.htm
#4
Ah right, that makes a tad more sense!
#5
I try to ignore the deductions on my paypacket as it's depressing...while it was nice to see my basic pay go up, my deductions have increased far faster. I think I'm being over taxed (or at least I hope so) based on the explanation aboveso I might be due some money back.

John
#6
cis_groupie
You can get the info from the Inland Revenue site, but basically your first £5225 is tax free, between £5226 & £33300 is taxed at the basic rate (22%), & then every thing over £33,300 is at the higher rate (40%). So if your salary is pushed over £33,300 you don't pay 40% on all your salary - just the amount over £33,300.

The link to the page showing the rates is: http://www.hmrc.gov.uk/rates/it.htm



I think that's not quite right....but close

If nrps1 gets a pay-rise (way-hay!) and earns, say, £34,000 and has the standard personal allowance (of £5,225), they will pay tax of:
£5,225 @ 0% = £0.00
£2,150 @ 10% = £215.00
£26,625 @ 22% = £5,857.50
Total £34,000, tax of £6,072.50

nrps1 would need to earn more than £38,525 (assuming the standard personal allowance) to break into the 40% tax bracket.

I'm basing the above on my tax return (eek, 31 January approaching fast!!!) [unfortunately I do have to pay HMRC 40% of any pay rise!!]

Hope it helps...
1 Like #7
OK, the answers given above (EDIT - prior to Martin Payne - sorry Martin) aren't quite correct. The truth, the whole truth and nothing but the truth is as follows:

First £5,225 of "Taxable income" is tax free.
£5,226 - £7,375 is taxed at 10%
£7,376 - £38,525 is taxed at 22%
£38,526+ is taxed at 40%

Your "Taxable income" is your Gross Salary less any pension contributions and "allowable expenses" in doing your job + any taxable benefits (eg company car) + any other taxable sources of income (such as interest).

Hope this helps.
#8
Phew! Someone agrees with me!!
#9
lol, I knew everyone would have different answers! So I was right in saying I do not pay 40% tax until I earn £38,525?
#10
Use this to calculate your pay :thumbsup:

http://www.e-gismos.com/ukpay.asp

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