Tax Rates 2012/13 Article Discussion

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Former_MSE_Dan
Former_MSE_Dan Posts: 1,593 Forumite
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edited 5 April 2019 at 2:43PM in Cutting tax


Hi folks,

This thread is to discuss the
Tax Rates guide,
updated for the 2019/20 tax year

Please click reply to discuss

Dan
Former MSE team member
«13456789

Comments

  • kim12345_2
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    I have a small business doing windows i sub my work out can i pay them cash with a invoice from them
  • mandy_weller
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    In Saturday's telegraph Ian Cowie wrote' Married couples have two personal allowances.... but many people fail to make any use of a non-earning spouse or partner's personal allowance....so something as simple as transfering cash from a highly-paid husband's bank account to a non-earning wife's account could reduce tax from the new top rate of 50pc ..... to zero'. i am not very tax literate but taken at face value this seems bizarre . how can moving money i've earned from my bank account to my partner's make it part of his tax free allowance? could someone explain? M W
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    Combo Breaker First Post
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    In Saturday's telegraph Ian Cowie wrote' Married couples have two personal allowances.... but many people fail to make any use of a non-earning spouse or partner's personal allowance....so something as simple as transfering cash from a highly-paid husband's bank account to a non-earning wife's account could reduce tax from the new top rate of 50pc ..... to zero'. i am not very tax literate but taken at face value this seems bizarre . how can moving money i've earned from my bank account to my partner's make it part of his tax free allowance? could someone explain? M W


    it simply means that if you give money to your partner and if they earn less than the personal allowance i.e. less than 6475 pa, then they can then save it in a saving account without paying any further tax.

    it was just very badly worded.
  • Rossta
    Rossta Posts: 5 Forumite
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    I'm struggling to understand how Income Tax is applied to my salary over the course of the financial year. Can anybody help to clarify?

    e.g.
    1) If I earn a gross of £2000 per month, do I get the first 3 months of the year without paying tax?
    2) If my total annual salary becomes effective for the 40% tax bracket, is this rate applied to my full years salary, only the months from the point that my earnings have exceeded the threshold, or backdated for the year at the point that the threshold is breached (If this makes sense)?

    Any help would be much appreciated.
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    no they don't do that

    you have a personal allowance of 6475
    this is spread out through out the year so your take home pay will be the same each month if your gross is the same

    so you are allowed 6475/12 = 539 per month 'tax free'

    similarly with the 40% band they pro rata it over the year so once again your take home pay will be the same each momnth if your gross pay is the same
  • Rossta
    Rossta Posts: 5 Forumite
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    Thank you.

    Is the band threshold effectively £37,400 + £6,475 (£43,875), or just the £37,400?

    What happens if there is an additional "unplanned" bonus which pushes me over the threshold? Is the additional tax appplied just to this bonus, or backdated across the year's gross income?

    And if my basic salary is below the threshold, but my TTE includes periodic "planned" bonuses of differing values which may push me above the threshold, how does this get calculated?

    Sorry for all the questions, but it confuses the life out of me...!:o
  • ex-dmp
    ex-dmp Posts: 85 Forumite
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    As long as your employer has the correct info from HMRC ie tax code, your employer will be able work out how much you need pay in tax and NI from your wage/salary irrespective of the amount paid on a weekly/monthly basis depending how often you are paid. They do this from HMRC published tax tables either manually or via payroll software.

    The point to remember is that you are assessed on a yearly basis and the HMRC should check to see what you should have paid and what you have actually paid for each given year. Any variation between the two is normally dealt with by a tax code change for the following year. If there is a big variation you may get a tax refund/tax bill depending on the amount tax over/under paid
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    Combo Breaker First Post
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    the 40% threshold is 43,875 above which the excess is taxed at 40%

    if you get bonuses there are several things to remember

    1. taking the tax for the whole year it doesn't matter when you get a bonus or whether they are spread out; the tax for the whole year only depends upon your total yearly earnings.

    2. however, on a month by month basis your tax may vary a great deal; so if your bonus was at the beginning of the tax year say April/may then you would be heavily taxed in those months, but in subsequent months you would get a refund so by year end you pay exactly the right amount of tax.

    3. the way its worked out is a bit complicated but basically like this
    each month you get the 539 tax free allowance and you get allowed 3116 at 20%

    so example by month three you have accumulated 3 x 539 tax free and 3 x 3116 allowable at 20% which are offset against yours earning to date.
    e.g. if you had zero earnings in april and may but a high salary in June then the 1618 would be tax free and the next 9350 would only be taxed at 20%



    so your allowances are cumulative through out the year unlike NI which takes each month separately..
  • Rossta
    Rossta Posts: 5 Forumite
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    Now it makes sense (I think):

    Basically HMRC knows how much per month would equal an annual salary in each tax bracket and applies the monthly tax against that calculated prospective annual gross?
  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
    Combo Breaker First Post
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    Rossta wrote: »
    Now it makes sense (I think):

    Basically HMRC knows how much per month would equal an annual salary in each tax bracket and applies the monthly tax against that calculated prospective annual gross?


    No, your payroll knows that the tax free allowance is 6475 and then the next 34800 is taxed at 20% and then everything else at 40% (and 50% soon).
    It divides these numbers by 12 and accumulates them on a monthly basis and offsetrs them against your total income to date.
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