40% Higher Tax Bracket. Will this affect me?

lush_walrus wrote:

Is that right, £37,295? not to doubt you, but I am taxed at the higher rate and earn about £2,000 less than that. Basically, Im wondering if I should contact my tax department to see why they are overtaxing me.

Easiest way to find out if you should be paying 40% tax, is to take your tax code, remove the letter and stick a 5 on the end, e.g. if your tax code is 324T then remove the T and put 5 on the end to make 3245. This is your personal allowance, the amount you earn before paying tax.

Add 31,400 (for pay up to 5th April 05) or 32,400 (for pay from 6th April 05) to your personal allowance. Is your salary higher than this? If it is then you are a higher rate taxpayer.

Wow thanks guys, I have to look into this as Im not entirely sure what I earn only that my accountant informed me I was paying 40% tax and so should look into having a pay cut and having my travel paid this year which is £3,000. Im not very good at keeping abreast of these things! Originally when I started my job, I was still self employed, then I decided to work full time for my employer who offered me a salery of £24,000 before tax ie they paid all tax and national insurance contributions and I received £2,000 a month, which my mortgage advisor worked out as me earning approx £30,000-£32,000 including deductions. I dont pay into any pensions or health schemes only pay tax and NI.

I had a pay rise of £2,000 (again with them paying the tax for me on top of that) and then Im just about to get £3,000 (excluding tax paid on top by them).

Aaaaarg I dont know its all too confusing for me, all I know is that I had to pay 40% tax on everything outside of work.

Rafter wrote:

No point in asking for a pay cut!

Income tax is not like stamp duty - you don't suddenly pay 40% on all your income, just the bit above the earnings threshold.

So £300 is still worth £180 after 40% tax.

R.

I Only wrote about the £300 paycut earlier, because at the time i mistakenly thought that poster might have been just over the 40% tax level. forgot personal allowance you see.

the reason for the pay cut was if poster had a significant amount of savings that would be taxed at 40%, ie double the tax they are paying at the moment

also dont forget to factor in gordon brown's 1% stealth tax...NIC. would make itt £177


:beer:

donsaini wrote:

also dont forget to factor in gordon brown's 1% stealth tax...NIC. would make itt £177

I thought that the upper earnings limit for NI was below the limit for 40% tax?